- This topic has 3 replies, 2 voices, and was last updated 10 years ago by
.
-
Posts
-
Hello John,
in June 2013 exercise 2 the current share price of the company (Hav Co) is used to determine the premium paid for acquisition using share-for-share payment method;
in Dec 2012 exercise 3 the expected share price of combined company is used to determine the premium and percentage gain under share-for-share offer.
I find this confusing… Why different approach are used? Which one is correct and better to use in exam?
Thanks.
The difference is really because one is looking at it from the point of view of the shareholders in the company being acquired (who presumably do not know the projections for the future) and the other is looking it from the point of view of the acquiring company (who are aware of the projections for the future).
Having said that, do appreciate that there is rarely just one correct answer at P4. So much depends on assumptions (just as in real life) and the marking in the exam is not as to whether you have the same answer as the examiner or not, but whether you can show that you really understand what you are doing.
- You must be logged in to reply to this topic.