ac310314151.pdf - ATTENTION The Singapore Copyright Act...

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AC3103 NANYANG TECHNOLOGICAL UNIVERSITY SEMESTER 1 EXAMINATION 2014-2015 AC3103- Accounting Analysis and Equity Valuation December 2014 Time Allowed: 2Yz hours INSTRUCTIONS 1 This paper contains THREE (3) questions and comprises SEVEN (7) pages. 2 Answer ALL THREE questions. 3 This is an open-book examination. 4 The number of marks allocated is shown at the end of each question. 5 Begin your answer to each question on a separate page of the answer book. 6 Answers will be graded for content and appropriate presentation. QUESTION NO. 1 BEGINS ON PAGE 2 1 ATTENTION: The Singapore Copyright Act applies to the use of this document. Nanyang Technological University Library
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AC3103 Question 1 XYZ Foods Ltd ("XYZ Foods"), a company listed on the Singapore Exchange, has its financial year end on 30 June. The company specialises in food and ingredients businesses and operates a retail network that spans across various continents. On 30 June 2014, XYZ Foods successfully acquired 100% of the issued capital of ABC Company Ltd ("ABC Co"), a herbs and spices company, for S$1,350 million. Immediately prior to the acquisition, ABC Co, which is also listed on Singapore Exchange, had 450 million shares on issue, trading at S$2.50 per share. The fair value of ABC Co's net tangible assets, as at 30 June 2014, amounted to S$393 million. With the acquisition, the combined businesses had a profit of S$129 million and sales of S$708 million in the year ended June 2014. In an announcement made by the XYZ Foods following the acquisition transaction, the "Acquisition Highlights" are stated as follows: Required Excellent strategic fit which complements XYZ Foods' existing skills and knowledge Growing worldwide business, strong presence in developing markets Market leader in Europe and Asia Pacific, No. 3 in Americas Strong regional positions in bakery ingredients combine well with existing XYZ Foods' products and technology A portfolio of brands in spices, extracts, dry seasonings and sauces Good profit growth prospects, strong cash generation and immediately earnings enhancing (a) Compute, in percentage terms, the premium that XYZ Foods paid to acquire ABC Co. (2 marks) (b) Explain why XYZ Foods is willing to pay a premium for this acquisition. (2 marks) (c) Based on the information above, what intangible assets might have been acquired by XYZ Foods. Provide three explanations. (6 marks) (d) Assuming that both intangible assets and goodwill are being recognised in XYZ Foods' post-acquisition financial statements, how could these impact the company's earnings subsequent to the acquisition? (4 marks) (TOTAL: 14 marks) 2 ATTENTION: The Singapore Copyright Act applies to the use of this document. Nanyang Technological University Library
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AC3103 Question2 Play&Leam Ltd (Play&Leam) is one of the world's leading manufacturers of babygear and preschool toys.
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