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Hi John,
In Question 3 Dec 2012 (proposal 2) we took the post acquisition share price to calculate the percentage gain on share price
But in June 2013 Question 2(proposal 2) we took the Share price before acquisition to calculate the percentage premium that shareholders receive.
Why did we use different share prices because the requirement seems the same to me
Best RegardsIn concern with June2013
Even i am confused now. I would have taken post acquisition combined market value of equity which is 29603.2m and divided by total number of shares post acq which is 3000m which would have given 9.87 instead of using 9.24.
John if i would have used this approach will i get marks or the examiner strictly follows the answer key ?It depends from whose point of view we are looking.
The acquiring company will know about the expected combined future flows and therefore what will happen to the share price. So when looking from their point of view we will use the new share price.
The target companies shareholders will not know what the new share price is likely to be and will base their decisions on whatever the existing share price is.
It is not always completely obvious in the exam whose point of view you are expected to be looking from. If it is not clear, then state your assumption (as always in P4 answers) and you would still get most of the marks.
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