Company ABC is planning to bid for company DDD, an unlisted company in an unrelated industry sector...

CIMA F3 Question Answer

Company ABC is planning to bid for company DDD, an unlisted company in an unrelated industry sector to ABC.

The directors of ABC are considering a number of different valuation methods for DDD before making a bid.

Which of the following is the MOST appropriate method for ABC to use to value DDD?

Using DDD's tangible assets.

Applying an industry P/E ratio to DDD's forecast earnings.

Discounting DDD's forecast cash flows using ABC's cost of equity.

Applying Company ABC's P/E ratio to DDD's forecast earnings.

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