The directors of a financial services company need to calculate a valuation of their company's equity in preparation for an upcoming initial Public Offering (IPO) of shares. At a recent board meeting they discussed the various methods of business valuation.
The Chief Executive suggested using a Price-earing (P./E) method of valuation, but the finance Director argued that a valuation based on forecast cash flows to equity would be more appropriate.
Which THREE of the following are advantages of valuation based on forecast cash flows to equity, compared to a valuating using a price earnings methods?

Company Z wishes to borrow $50 million for 10 years at a fixed rate of interest.
Two alternative approaches are being considered:
1. Issue a 10 year bond at a fixed rate of 6%, or
2. Borrow from the bank at Libor +2.5% for a 10 year period and simultaneously enter into a 10 year interest rate swap.
Current 10 year swap rates against Libor are 4.0% - 4.2%.
What is the difference in the net interest cost between the two alternative approaches?

A company has a cash surplus which it wishes to distribute to shareholders by a share repurchase rather than paying a special dividend.
Which THREE of the following statements are correct?

Company A needs to raise AS500 mi lion to invest in a new project and is considering using a pub ic issue of bonds to finance the investment.
Which THREE of the following statements-relating to this bond issue are true?

The competition authorities are investigating the takeover of Company Z by a larger company, Company Y.
Both companies are food retailers.
The takeover terms involve using a part cash, part share exchange means of payment.
Company Z is resisting the bid, arguing that it undervalues its business, while lobbying extensively among politicians to sway public opinion against the bidder.
Which of the following actions by Company Y is most likely to persuade the competition authorities to approve the acquisition?