COMPUTER SCIENCE TRIPOS Part II – 2014 – Paper 7
Business Studies (JAL)
(a) List, with one sentence descriptions, five methods of valuing a company.
[5 marks]
(b) The outline profit and loss account and balance sheet for Certain Software Ltd
are as follows:
£’000 Q1 Q2 Q3 Q4 TOTAL
INCOME
Consultancy 100 200 300 400 1000
Licences 0 25 50 25 100
Total income 100 225 350 425 1100
EXPENDITURE
Salaries 100 100 100 100 400
Overheads 125 125 125 125 500
Total expenditure 225 225 225 225 900
Profit/(loss) (125) 0 125 200 200
Balance sheet
SOURCE
Shareholders capital 100
Bank Loan 50
Trade Debtors 200
Retained Profit 200
Total 550
APPLICATION
Assets: Computers, desks etc 200
Creditors 100
Bank 250
Total 550
(i) Provide three different valuations for the company, showing how they were
obtained. State any assumptions that you make. [6 marks]
(ii) 75% of sales are made to Mammoth Corporation, a large public US
company. The company receives an offer from Mammoth of $1.5M for
the company. Certain Software Ltd is owned by the founding Directors
who still work for the company. Advise the directors. [5 marks]
(iii) As negotiations proceed it emerges that the takeover terms are $500K in
cash and $1M in shares of Mammoth Corporation, locked-in for 1 year.
Does this alter your advice? [4 marks]