Company A is located in Country A, where the currency is the A$.

CIMA F3 Question Answer

It is listed on the local stock market which was set up 10 years ago.

It plans a takeover of Company B, which is located in Country B where the currency is the B$, and where the stock market has been operating for over 100 years.

Company A is considering how to finance the acquisition, and how the shareholders of Company B might respond to a share exchange or cash (paid in B$).

Which of the following is likely to explain why the shareholders of Company B would prefer a share exchange as opposed to a cash offer?

It would allow them to realise their investment and make a capital gain.

It would avoid them being exposed to foreign currency risk.

They would receive shares in a market that is likely to be more efficient.

It would enable them to benefit from the future performance of the combined entity.