Part: A) 30 marks
A friend has just said that they believe most people who buy shares do so because they like the company or their products. Their illustration was that if people like Apple phones then they’d be more likely to invest in Apple shares.
Discuss the factors that could influence an investor to buy particular securities and so the validity of your friend’s statement.
As part of the discussion include reference to risk v return, behavioural finance, market efficiency, insider dealing and an index model (like CAPM).
(Use no more than 1000 words – you may use fewer)
Part B) 40 marks
A.B. Foods company:
a) Compare the movement in it’s quoted share price on a quarterly basis for the past 3 years with the change in some market statistics like:
i. Interest rates
ii. Inflation
iii. GDP
iv. Unemployment
v. Any others you believe to be useful
(15 marks)
b) Complete a PESTLE analysis for the company’s industry (some of the sections may be more brief than others);
(15 marks)
c) Based on your understanding of the company, the economy and the results of a) & b), justify 3 key factors that you’d expect to influence the value of the company’s shares over the next 12 months.
(10 marks)
Part: C) 30 marks
a) Explain, in simple terms, the various ways that a target company could be valued as part of a takeover bid.
(15 marks)
b) What options would a listed company have to raise finance to fund a takeover bid? Explain the advantages and disadvantages of each option (consider issue costs, issue value, control and life time costs).
(15 marks)
