QUESTION 19Identify the incorrect statement concerning valuation methods.O A. A major difficulty with the price/earnings ratio method is determining the future cash flows to which the price/earningsratio is appliedO B. The discounted cash flow method looks at the incremental cash flows arising from a proposed acquisitionOC.The market capitalisation of a company reflects marginal trading in its sharesO D. Net asset valuations are often of little relevance in deciding on a bid priceO E. The dividend growth model offers a deprival value for target shareholders QUESTION 20CFK pic's current share price is E4.00. An Investor is wondering whether to buy shares in CFK or warrants In the company. The warrant has duration of one year and allows the purchase of 20 CFK shares at an exercise price of E4.10. The cost of the warrant is 56.00. Ir theshare price for CFK Is E4.50 In a year's time what are the corresponding returns for buying CFK shares and warrants on CFK shares? CFK plc pald no dividend over this perlod.Return on shares 12.5% Return on the optlon 33.3%Return on shares 25% Return on the option 10%. Return on shares 2.5% Retum on the option 33.3%D. Return on shares 12.5% Return on the option: nllReturn on shares 12.5% Return on the optlon 10%

Return in shares = (current price - purchase price)/purchse price = (4.5 - 4)/4 = 12.5% Return on…

QUESTION 20 CFK plc's current share price is 54.00. An Investor is wondering whether to buy shares in CFK or warrants in the company. The warrant has duration of one year and allows the purchase of 20 CFK shares at an exercise price of 54.10. The cost of the warrant is 56.00. rme share price for CFK is E4.50 in a years time what are the corresponding returns for buying CFK shares and warrants on CFK shares? CFK pic pald no dividend over this period. A. Retum on shares 125% Returm on the option 33.3% . Retum on shares 25% Retum on the option 10% C. Retum on shares 25% Returm on the option 33.3% Retum on shares 12.5% Retun on the option: nill E Retum on shares 12.5% um on the option 10 00000

QUESTION 20 CFK plc's current share price is 54.00. An Investor is wondering whether to buy shares in CFK or warrants in the company. The warrant has duration of one year and allows the purchase of 20 CFK shares at an exercise price of 54.10. The cost of the warrant is 56.00. rme share price for CFK is E4.50 in a years time what are the corresponding returns for buying CFK shares and warrants on CFK shares? CFK pic pald no dividend over this period. A. Retum on shares 125% Returm on the option 33.3% . Retum on shares 25% Retum on the option 10% C. Retum on shares 25% Returm on the option 33.3% Retum on shares 12.5% Retun on the option: nill E Retum on shares 12.5% um on the option 10 00000

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter7: International Arbitrage And Interest Rate Parity

Section: Chapter Questions

Problem 2QA

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