These are ACCA F9 (FM) Financial Management MCQs for Part-F of the Syllabus “Business valuations”.

These multiple-choice questions (MCQs) are designed to help ACCA F9 students to better understand the exam format. We aim to instill in students the habit of practicing online for their CBE exams. By doing so, students can reduce exam stress and prepare more effectively.

Please note:

Students should not attempt these MCQs until they have finished the entire chapter.
All questions are compulsory, so please do not skip any.

We hope that these MCQs will be a valuable resource for students preparing for the ACCA F9 (FM) exam.

INFORMATION ABOUT THESE CBE MCQs Test/Quiz

Course:	ACCF – Association of Chartered Certified Accountants
Fundamental Level:	Applied Skills
Subject:	Financial Management
Paper:	F9 – FR
Chapter and Topic	Nature and purpose of the valuation of business and financial assets , Models for the valuation of shares, The valuation of debt and other financial assets, Efficient market hypothesis (EMH) and practical considerations in the valuation of shares
Syllabus Area:	F – “Business valuations”
Questions Type:	CBE MCQs
Exam Section:	Section A

Syllabus Area

These Multiple Choice Questions (MCQs) cover the Syllabus Area Part F of the Syllabus; “Business valuations” of ACCA F9 (FM) Financial Management Module.

Time

These MCQs are not time-bound. Take your time and solve them without stress. Pay proper attention and focus. Do not rush or hesitate

Result

Students will get their F9 CBE MCQs Test results after they finish the entire test. They will also be able to see the correct and incorrect answers, as well as explanations for the incorrect questions.

Types of Questions

MCQs: Choose one from the given options.
Multiple choice: Choose all those answers which seem correct/ or incorrect to you, as per the requirement of the question. Keep your eye on the wording “(select all those which are correct/ or incorrect)“.
Drop-down: Select from the list provided.
Type numbers: Type your answer in numbers as per the requirement of the question.

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F9 (FM) - Part F - MCQs - Business valuations

Course: ACCA - Association of Chartered Certified Accountants
Subject: F9 (FM) - Financial Management
Syllabus Area: F - Business valuations
Chapter: 17 Business valuations, 18 Market efficiency
Exam Section: Section A
Questions type: MCQs
Time: No Time Limit

INSTRUCTIONS

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1 / 15

Which TWO of the following would be evidence of strong form market efficiency?

Inability to consistently outperform the market and make abnormal gains

The lack of regulation on use of private information (insider dealing)

Immediate share price reaction to company announcements to the market

Regulation to ensure quick and timely public announcement of information

2 / 15

Which of the following is evidence that stock markets are semi-strong form efficient?

Share price reaction occurs before announcements are made public

Repeating patterns appear to exist

Attempting to trade on consistently repeating patterns is unlikely to work

The majority of share price reaction to news occurs when it is announced

3 / 15

Sarah decides to plot past share price movements to help spot patterns and create an investment strategy.

What does Sarah believe the stock market is?

Completely inefficient

Strong form efficient

Weak form efficient

Semi-strong form efficient

4 / 15

PX Co is considering making a takeover bid for JJ Co. Both companies are large listed sportswear retailers that sell to the general public.

The shares of both PX Co and JJ Co are regularly traded and their share prices react quickly to new information.

Which of the following is likely to be needed to allow PX Co to make sure that its bid is not too high?

An aged accounts receivable summary

No information is needed because the stock market is semi-strong form efficient

The latest published statement of JJ Co's financial position

Estimates of the present value of the synergies that are likely to result from the takeover

5 / 15

WC Co announces that it decided yesterday to invest in a new project with a huge positive net present The share price doubled yesterday.

What does this appear to be evidence of?

Technical analysis

A weak form efficient market

A strong form efficient market

A semi-strong form efficient market

6 / 15

NCW Co is considering acquiring the ordinary share capital of CEW CEW Co has for years generated an annual cash inflow of $10m. For a one-off investment of $6m in new machinery, earnings for CEW Co can be increased by $2m per year. NCW Co has a cost of capital of 10%.

What is the value of CEW Co?

$120 million

$100 million

$114 million

$94 million

7 / 15

A company has in issue loan notes with a nominal value of $100 each. Interest on the loan notes is 6% per year, payable The loan notes will be redeemed in eight years' time at a 5% premium to nominal value. The before-tax cost of debt of the company is 7% per year.

What is the ex interest market value of each loan note?

$94.03

$102.91

$103.10

$96.94

8 / 15

A company has 7% loan notes in issue which are redeemable in 7 years' time at a 5% premium to their nominal value of $100 per loan note. The before-tax cost of debt of the company is 9%and the after-tax cost of debt of the company is 6%.

What is the current market value of each loan note?

$103.14

$108.90

$89.93

$92.67

9 / 15

Black Co has in issue 5% irredeemable loan notes, nominal value of $100 per loan note, on which interest is shortly to be Black Co has a before-tax cost of debt of 10% and corporation tax is 30%.

What is the current market value of one loan note?

$76

$50

$40

$55

10 / 15

Alpha Co and Beta Co are two companies in different industries who are both evaluating the acquisition of the same target company called Gamma Gamma Co is in the same industry as Alpha Co.

Alpha Co has valued Gamma Co at $100m but Beta Co has only valued Gamma Co at $90m.

Which of following statements would explain why Alpha Co's value of Gamma Co is higher?

Beta Co could achieve more synergy

Alpha Co has used more prudent growth estimates

Gamma Co is a direct competitor of Alpha Co

Beta Co is a better negotiator than Alpha Co

11 / 15

Jo Co is a company which is financed by equity It has just paid a dividend of $60m and earnings retained and invested were 60%. Return on investments is 20% and the cost of equity is 22%.

What is the market value of the company? (in millions, to the nearest whole million)

$_____ million

12 / 15

Cant Co has a cost of equity of 10% and has forecast its future dividends as follows:

Current year: No dividend
Year 1: No dividend
Year 2: $0.25 per share
Year 3: $0.50 per share and increasing by 3% per year in subsequent years.

What is the current share price of Cant Co using the dividend valuation model?

$5.57

$7.35

$6.28

$6.11

13 / 15

ELW Co recently paid a dividend of $0.50 a share. This is $0.10 more than three years ago. Shareholders have a required rate of return of 10%.

Using the dividend valuation model and assuming recent dividend growth is expected to continue, what is the current value of a share? (to two decimal places)

14 / 15

The following financial information relates to QK Co, whose ordinary shares have a nominal value of $0.50 per share:

	$m	$m
Non-current assets		120
Current assets
Inventory	4
Trade receivables	12	20
Total assets		140
Equity
Ordinary shares	25
Reserves	80	105
Non-current liabilities		20
Current liabilities		15
Total equity and liabilities		140