QUESTION 18 Identify the incorrect statement concerning valuation methods. O A. Net asset valuations are the best way of deciding a bid price O B. A major difficulty with the price/earnings ratio...

Extracted text: QUESTION 18 Identify the incorrect statement concerning valuation methods. O A. Net asset valuations are the best way of deciding a bid price O B. A major difficulty with the price/earnings ratio method is determining the earnings to which the price/earnings ratio is applied OC. The discounted cash flow method looks at the incremental cash flows arising from a proposed acquisition OD. The market capitalisation of a company reflects marginal trading in its shares O E. The dividend growth model offers a deprival value for target shareholders


Extracted text: QUESTION 17 City plc plans to buy Utd plc. The current distributable earnings of Utd plc are £12m. City estimates that it will be able to grow future earnings of Útd by'4% per annum. It is proposing to use an earnings yield of 11% in the valuation of Utd. Using the Earnings Yield method, what value will City put on Utd? O A. £178m O B. £109m OC. £200m O D.£114m O E. £222m