(b)

(i) Appendix 1
Anatra Co, Manufacturing business, PE ratio 1
Estimate of the value created from sell-off 3
Appendix 2
Cigno Co asset beta 1
Combined company asset beta 1
Combined company equity beta 1
Combined company cost of capital 1
Appendix 3
Sales revenue, years 1 to 4 1
Operating profit, years 1 to 4 1
Taxation, years 1 to 4 1
Capital investment, years 1 to 4 1
Value from years 1 to 4 1
Value from year 5 onwards 1
Value for Cigno Co shareholders before impact of savings from tax and employee cost reduction 2
Appendix 4
Value created from tax and employee cost savings 1
Value for Cigno Co shareholders after impact of savings from tax and employee cost reduction 1
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18
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(ii) Discussion of values for the equity holders, additional costs/benefits not given 3–4
Methods used and assumptions made 4–5
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Max 8
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(iii) Reputation factors 1–2
Ethical factors 1–2
Comment on value 1–2
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Max 4
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Professional marks for part (b)
Report format 1
Structure and presentation of the report 3
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4
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