BUSINESS FINANCE DECISIONS

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Certified Finance and Accounting Professional Examination – Summer 2021

A.1 Avion Limited

(a) Component X Component Y
Material constraint: Alloy available (kg) 18,200 18,200
Alloy usage (kg per unit) 2.35 2.15
Maximum manufacturing volume per month (units) 7,745 8,465
Maximum demand (units) 9,800 12,600
Demand (shortfall)/surplus (units) (2,055) (4,135)
1st constraint 1st constraint
Machine Line A constraint (hours) 5,600 5,600
Machine A hours per unit 0.65 0.40
Maximum manufacturing volume per month (units) 8,615 14,000
Maximum demand (units) 9,800 12,600
Demand (shortfall)/surplus (units) (1,185) 1,400
2nd constraint Not a constraint
Machine Line B constraint (hours) 6,300 6,300
Machine B hours per unit 0.55 0.60
Maximum manufacturing volume per month (units) 11,455 10,500
Maximum demand (units) 9,800 12,600
Shortfall/surplus (units) 1,655 (2,100)
Not a constraint 2nd constraint

Since possible production is lowest for available Alloy, therefore it is the most significant limiting
factor.
Component X Component Y
---------- Rs. per unit ----------
Selling price 36,250 28,750
Material costs (7,344) (6,719)
(3,125×2.35) (3,125×2.15)
Machine A time (9,750) (6,000)
(15,000×0.65) (15,000×0.4)
Machine B time (8,250) (9,000)
(15,000×0.55) (15,000×0.6)
(25,344) (21,719)
Contribution per unit 10,906 7,031

---------- Rs. in '000 ----------

Total contribution 84,467 59,517
(10,906×7,745) (7,031×8,465)
Production fixed costs (20,000) (18,000)
Profit for the month 64,467 41,517
Profit margin for the month 23% 17%

Conclusion
The decision is to manufacture Component X, as this delivers an additional profit of Rs. 22.950
million for the month.

Page 1 of 12
 BUSINESS FINANCE DECISIONS
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Certified Finance and Accounting Professional Examination – Summer 2021

(b) Component X Component Y

Production from (a) - alloy constraint (Units) 7,745 8,465
------------ Hours ------------
Machine Line A hours used to meet this volume 5,034 3,386
(7,745×0.65) (8,465×0.4)
Machine Line A hours available 5,600 5,600
Unused machine A hours (5,600 hrs. max) 566 2,214
Machine Line B hours used to meet this volume 4,260 5,079
(7,745×0.55) (8,465×0.6)
Machine Line B hours available 6,300 6,300
Unused machine B hours (6,300 hrs. max) 2,040 1,221
Total unused machine hours 2,606 3,435

Component X Component Y
------------ Rs. per unit ------------
Selling price (Existing price) 36,250 28,750
Decrease by 10% (3,625) (2,875)
Price of unused machine hours per unit 5,047 6,087
[39,090(2,606×15,000)÷7,745] [51,525(3,435×15,000)÷8,465]
Revised selling price 37,672 31,962
Variable cost [Part(a)] (25,344) (21,719)
Revised contribution per unit 12,328 10,243
------------ Rs. in '000 ------------
Total contribution 95,480 86,707
(12,328×7,745) (10,243×8,465)
Production fixed cost (20,000) (18,000)
Revised profit 75,480 68,707
Existing profit [Part(a)] 64,467 41,517
Change in profit 11,013 27,190

The change in pricing policy does not change the decision to manufacture Component X as this
component continues to deliver the highest revenue. There is uncertainty about whether customer
would accept such a price or not.

Units
(c) If further alloy is available, then can make up the next constraint for Component 8,615
X which is Machine Line A (5,600÷0.65)
Production volume from part (a) − alloy constraint (7,745)
Additional volume of Component X which can be manufactured 870

Additional Alloy in kg required to meet this demand (870×2.35) 2,045

There is 2,500 kg available it is feasible to manufacture these additional units

Rs. in '000
Revised revenue at max demand of 8615 units (8,615×36,250) 312,294
Cost of existing alloy [Part (a)] (56,877)
Cost of machine time (A) at 8615 units (8,615×0.65×15,000) (83,996)
Cost of machine time (B) at 8615 units (8,615×0.55×15,000) (71,074)
Target contribution (62,459(312,294×20%)+20,000) (82,459)
Target cost of additional alloy to meet profit target 17,888

Maximum price of Alloy to meet 20% profit (17,888÷2,045) Rs. per kg 8,747
Existing price Rs. per kg 3,125
Price Premium for Alloy Rs. per kg 5,622
Price Premium for Alloy % 180%

Page 2 of 12
 BUSINESS FINANCE DECISIONS
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Certified Finance and Accounting Professional Examination – Summer 2021

A.2 Craft Furniture Ltd

(a) Cash flow forecasts

(i) No change in working capital policies
Rs. in million
Cash received from customers (520+52–75) 497.0
Payment to suppliers [327.4(299.9–35+62.5)+32–46.4] (313.0)
Payment for operating expense (65.0)
Interest (5.4)
Dividend (declared in 2020, paid in 2021) (33.9)
Tax paid (28.3)
Acquisition of non-current assets (55.0)
Reduction in cash/increase in borrowing (3.6)

(ii) Working capital proposals are implemented

Rs. in millions
Cash received from customers [514.8(520–5.2(520×50%×2%)+7.5(W-1)] 522.3
Payment to suppliers [306.2(W-2)+6.8(W-2)] (313.0)
Operating expense (65.0)
Interest (4.5)
Dividend (declared in 2020, paid in 2021) (33.9)
Tax paid (28.3)
Acquisition of fixed assets (55.0)
Increase in cash 22.6

W-1: Revised receivables will be: 37.5(75/2) + 6.98(260.0  0.98  10/365) = 44.5
Annual decrease in receivables = 52.0 – 44.5 = 7.5

W-2: Revised purchases = 299.9 × 95% → 284.9 – 35 + 56.3(62.5×90%) = 306.2

Revised payables = 306.2 × 30 ÷ 365 = 25.2
Annual decrease in trade payable = 32 – 25.2 = 6.8

Note:
It can also be solved by indirect method.

(b) Receivables
 Although customers are supposed to pay within 30 days, they are currently taking
45 days and are predicted to take 53 days next year. The discount scheme offered
to customers who pay within 10 days is predicted to reduce the average payment
period to (10 + 53)/2 days = 31.5 days.
 The discount cost, estimated at Rs. 5.2 million (260×2%), will be partially paid for
by interest savings on the reduction in average receivables of from Rs. 75 million
to Rs. 44.5 million.
 There is also the possibility of bad debt savings which needs to be quantified.
 Before implementing the new policies, CFL should consider improving our credit
control procedures to chase overdue invoices sooner and speed up payments.

Page 3 of 12
 BUSINESS FINANCE DECISIONS
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Certified Finance and Accounting Professional Examination – Summer 2021

Trade payables and inventory

 The revised proposals will require us to pay in 30 days, but enable a 5% reduction
in cost of sales through reduced prices and other purchasing costs. On the basis of
our assumptions for the 'just in time' policy, the projected financial effects are
extremely good.
 Cost of sales is reduced by Rs. 15 million and there are interest savings on
inventory reductions of Rs. 6.25 million and although these are offset by interest
costs on the cash requirement to reduce trade payables from Rs. 46.4 million to Rs.
25.2 million, the overall effect is beneficial.
 However, our predictions may be optimistic as suppliers may require higher prices
to deliver 'just in time'.
 Also, this system will increase our dependence on fewer suppliers and will greatly
increase the likelihood of production breakdowns due to lack of stock unless we
implement higher quality processes.

Profitability and cash flow

 Overall, on the basis of our projections, the scheme will improve profitability before
tax by Rs. in millions (15.0 – 5.2 + 0.9) = Rs. 10.7m, increase by 8%,
 Cash flow will be improved by Rs. 3.6m + Rs. 22.6m = Rs. 26.2m although there will
be an impact on tax payable the following year.

Recommendation:
Despite the reservations stated above, the proposals to change the working capital policy
should be implemented as these new polices will reduce the risk of exceeding the agreed
overdraft facility.

Workings:
2021 2021
(New policy) (Existing policy)
Receivable days: receivables/sales  365 31.5 days 53 days
Payable days: Trade payables/purchases  365 30 days 52 days
Inventory days: Inventory/cost of sales  365 72 days 76 days

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 BUSINESS FINANCE DECISIONS
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Certified Finance and Accounting Professional Examination – Summer 2021

A.3 Zebra Ltd.

(a) (i) Interest rate futures
1. Hedging with futures
A future is an agreement on the future price of a variable. Hedging with
futures offers protection against adverse movements in the underlying asset. If
these occur, they will more or less be offset by a gain on the futures market.
The person hedging may be worried about basis risk, the risk that the futures
price may move by a different amount from the underlying asset being
hedged.

2. Futures standardised contract terms

The terms, sums involved and periods of interest rate future contracts are
standardised which may result in hedge inefficiencies caused by either having
too many or too few contracts. Where too few contracts are used, then the
unhedged amount of the loan remains exposed to interest rate movements.

3. Deposit
Futures contracts require the payment of a deposit to the exchange to cover
the possibility of losses. A company needs to be accepted by the exchange in
order to trade, which may rule out small private companies or those with a
poor credit rating.

4. Timescale
The majority of interest rate futures are taken out to hedge borrowing or
lending for short periods.

(ii) Interest rate options

1. Guaranteed amounts
The main advantage of options is that the buyer cannot lose on the interest
rate and can take advantage of any favourable rate movements. An interest
rate option provides the right to borrow a specified amount at a guaranteed
rate of interest. On the date of expiry of the option, the buyer must decide
whether or not to exercise their right to borrow. The buyer will only exercise
the option if actual interest rates have risen above the option rate.
2. Premium cost
However, a premium must be paid regardless of whether or not the option is
exercised. The premium cost can be so high that the option is no longer
worthwhile if interest rate movements are expected to be marginal.
3. Types of option
Options can be negotiated directly with the bank (over the counter, OTC) or
traded in a standardised form on the futures and options exchange. OTC
options will be preferable if the buyers require an option tailored to their
needs in terms of maturity date, contract size, currency or nature of interest.
OTC options are also generally more appropriate if the buyer requires a long
time to maturity or a large contract size. Traded options will be more
appropriate if the buyer is looking for options that can be exercised at any
time, is looking for a quick, straightforward deal, or might want to sell the
options before the expiry date if they are not required.

Page 5 of 12
 BUSINESS FINANCE DECISIONS
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Certified Finance and Accounting Professional Examination – Summer 2021

(b) Hedging the borrowing rate using futures

Futures hedge set up

(i) Choose June contracts as the company intends to borrow in six months’ time
(ii) Set up hedge by acquiring 'Sell June futures' to hedge against interest rates rising in
next six months before the loan starts
(iii) Number of contracts = Rs. 130m/Rs. 10m  6 months/3 months = 26 contracts
(iv) Tick size is the profit or loss on one contract on each movement of 0.01%
3
(0.01% × × 10,000,000) = Rs. 250
12

(v) Estimate closing futures price

June contract expires in seven months at 30 June. KIBOR is currently 4.5% (95.50)
June contract basis risk 95.50 – 95.29 = 21 ticks, difference between current and
futures price.
At 1 June, June futures have one month to expiry.
1
Ticks per month = 21 × = 3 ticks
7
Therefore, if KIBOR rises to 5.25% (94.75), the expected futures price at 1
June is 94.75 – 0.03 = 94.72
(vi) Outcome of hedge
The results of the hedge are shown below.
Futures market
1 Dec: Sell Futures @ 95.29
1 June: Buy Futures @ 94.72
Profit on one contract 0.57 or 57 ticks
Profit on 26 contracts: 26  Rs. 250 (tick size)  57 (no. of ticks) Rs. 370,500

Net outcome of interest rate futures hedge

Rupees
Payment in spot market 5.25%  Rs. 130m  6/12 (3,412,500)
Profit/(Loss) in futures market 370,500
Net cost of loan (3,042,000)

Effective interest cost is 3,042,000 × 2 / Rs. 130m = 4.68%

However, this rate is dependent on the assumption that basis declines linearly; this
may not be the case.
Options hedge: Hedging the borrowing rate using options
(i) Choose June contracts as the company intends to borrow in six months' time.
(ii) Set up hedge by acquiring option to exercise 'Sell June futures' to hedge against
interest rates rising in next six months before the loan starts. This is the put option.
(iii) Number of contracts = Rs. 130m/Rs. 10m  6 months/3 months = 26 put options
(iv) Tick size is the profit or loss on one contract on each movement of 0.01%.
3
(0.01%   10,000,000) = Rs. 250
12

Page 6 of 12
 BUSINESS FINANCE DECISIONS
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Certified Finance and Accounting Professional Examination – Summer 2021

(v) Option hedge outcome

Exercise Exercise Exercise
95250 95500 95750
Put option strike price (right to sell) 95.25 95.50 95.75
June futures price 94.72 94.72 94.72
Exercise option? (prefer to sell at highest price) Yes Y Yes Yes
Gain (ticks) 553 78 103
Option outcome (26 × 250 × tick gain) 344,500 507,000 669,500

(vi) Net outcome of interest rate option hedge

95250 95500 95750
£--------------- Rupees ---------------
Actual interest cost (as above) (3,412,500) (3,412,500) (3,412,500)
Value of option gain 344,500 507,000 669,500
Premium ( (120,250) (182,000) (263,250)
2618.5250 2628250 2640.5250
Net cost of loan 3,188,250 3,087,500 3,006,250
Effective interest cost
(Cost × 2/Rs. 130m) 4.905% 4.75% 4.625%

An additional benefit of the option is that if interest rates fall, the option can lapse to
keep the upside benefit of lower loan rates. The downside of the option is that it has an
initial cash outflow impact as the premium must be paid on 1 December.

Conclusion
The option with exercise price of 95750 is the preferred hedging method, as it has a
lower interest cost of 4.625% than the futures hedge outcome of 4.68%.

Page 7 of 12
 BUSINESS FINANCE DECISIONS
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Certified Finance and Accounting Professional Examination – Summer 2021

A.4 QuickCook Ltd

(a) Year Y0 Y1 Y2 Y3 Y4 Y5 Y6
--------------------------------- TLR in million -------------------------------
Turkey inflation 9% 8% 7% 6% 5% 5%
Pakistan inflation 4% 3% 3% 2% 2% 2%
Forecast sale volume 40,000 60,000 90,000 120,000 120,000
Sales revenue at 1450
TLR (current value)
per unit 63.2 102.4 164.4 232.3 243.9
Variable cost per unit
in Turkish TLR (21.2) (33.4) (52.1) (71.5) (73.0)
Fixed costs in Turkish
TLR (12.4) (12.7) (13.1) (13.5) (13.9)
Total operating profit-
A 29.6 56.3 99.2 147.3 157.0
Tax at 25% (7.5) (14.2) (24.9) (36.9) (39.4)
Investment in plant
and machinery (W-1) (60.0) 84.1
Government grant 6.0
Working capital (W-2) (45.0) (4.1) (3.9) (3.7) (3.4) 60.1
Total TLR cashflows
remitted to Pakistan (99.0) 25.5 44.9 81.3 119 264.3 (39.4)
Exchange rate TLR/
Pakistan Rupee - B (W-
3) 0.0410 0.0430 0.0451 0.0468 0.0486 0.0501 0.0515
--------------------------------- Rs. in million -------------------------------
Cashflow in
Pakistan rupees (2,414.6) 593 995.6 1,737.2 2,448.6 5,275.4 (765)
Additional 4%
Pakistan tax on Turkey
income (A/B) x4% (27.5) (49.9) (84.8) (121.2) (125.3)
Pakistan cash flows
Cost of components –
Net of tax (Rs. 800 per
unit) (23.6) (36.5) (56.4) (76.7) (78.2)
Opportunity cost: Lost
revenue 10%  Rs'm
600  inflation (624.0) (642.7) (662.0) (675.2) (688.7)
Total project
cashflows (2,414.6) (54.6) 288.9 968.9 1,611.9 4,387.3 (890.3)
Discount rate (13%) 1 0.8850 0.7831 0.6931 0.6133 0.5428 0.4803
Present value (2,414.6) (48.3) 226.2 671.5 988.6 2,381.4 (427.6)
NPV 1,377.2

Workings:
W-1: TLR 60m × 1.09 × 1.08 × 1.07 × 1.06 × 1.05 = TLR 84.1m

W-2: Working capital

Y0 Y1 Y2 Y3 Y4 Y5
Turkey inflation 9% 8% 7% 6% 5%
Working capital 45.0 49.1 53.0 56.7 60.1 0.0
Cash flow (TLR millions) (45.0) (4.1) (3.9) (3.7) (3.4) 60.1

W-3: Exchange rates

Y0 Y1 Y2 Y3 Y4 Y5 Y6
Turkey inflation 9% 8% 7% 6% 5% 5%
Pakistan inflation 4% 3% 3% 2% 2% 2%
Exchange rate (1 Pakistan
Rupee equals) 0.0410 0.0430 0.0451 0.0468 0.0486 0.0501 0.0515

Page 8 of 12
 BUSINESS FINANCE DECISIONS
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Certified Finance and Accounting Professional Examination – Summer 2021

Limitations of the analysis

The calculations are based on many assumptions and estimates concerning future cash
flows, as follows:
(i) Purchasing power parity, used to estimate exchange rates, is only a
'broad-brush' theory; many other factors are likely to affect exchange rates and
could increase the risk of the project.
(ii) The estimates of inflation which are used to estimate costs and exchange rates in the
calculations above are subject to inaccuracy.
(iii) Assumptions about future tax rates and the restrictions on price increases may be
incorrect.
(iv) Cash flows beyond the five-year time horizon may be crucial in determining the
viability or otherwise of the project. Economic values of the operational assets at
Year 5 may be a lot higher than the residual values included in the calculation
(v) Further investment opportunities as a result of setting up operations in Turkey have
not been considered in this analysis.
(vi) Potential tax savings resulting from capital allowances on factory, plant and
machinery have been ignored. If included, these could improve the overall NPV.

Conclusion
The net present value is positive; therefore, the company should proceed subject to further
evaluation of non-financial factors and due diligence of market information regarding
forecast prices, revenues and data used to predict exchange rates.

(b) Circumventing dividend remittance restrictions

Restrictions on the transfer of dividends from one country to another can be circumvented
by two main methods:

Loan finance
If the company had foreseen the possibility of dividend restriction, it could have
arranged for the subsidiary to be financed mainly by an inter-company loan, with equity
investment nominally small. All expected returns could then be paid as inter-company
loan interest.

A less obvious way of achieving the same objective is for the parent to lend the major
part of its investment to an independent international bank, which then lends to the
Turkey subsidiary. Returns would be paid as interest to the bank, which would in turn pay
interest to the parent company.

Transfer pricing
Adjusting the transfer prices for supplies purchased by the parent and supplied via
inter-company sales of goods or services to limit profit in the subsidiary, and remit cash
by way of settling supplier costs. Further charges to the subsidiary can be made for head
office overhead and management charges and for royalties and patents on manufacturing
processes used at the factory in Turkey.

The tax authority in Turkey would probably attempt to prevent these arrangements from
being effective as they would limit tax payments on profits generated in Turkey.

Page 9 of 12
 BUSINESS FINANCE DECISIONS
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Certified Finance and Accounting Professional Examination – Summer 2021

A.5 SuperSky
(a) SuperSky
Current equity value (Rs in million) (2m × Rs. 4,300) 8,600
Current debt value (Rs. in million) 2,000

Step 1: Ungear Industry equity beta

ßu = ßg × VE / [VE + VD (1–t)]
= 2.45×0.5/[0.5+0.5(1–0.29)]
= 1.43

Step 2: Regear the asset beta to SuperSky's Gearing

1.43 = ßg × 8,600 / [8,600 + 2,000 (1–0.29)]
1.67 = ßg

Step 3: Calculate the cost of equity using CAPM

Ke = Rf + ßg (Rm – Rf)
Ke = 3.75% + 1.67 (6.85% – 3.75%) = 8.93%

Step 4: Calculate the after-tax cost of debt using credit rate tables
SuperSky has Rs. 2,000 million of 'AA' rated corporate bonds with an average 18 years
to maturity

Rating 10 years 30 years

AA 75 103

The expected yield of the bond = risk free bond rate + credit risk premium.
Expected yield on government bond, which equates to risk free, is 3.75%.

Calculation of credit risk premium

Use interpolation to determine 18-year maturity premium between 10 years and 30 years.
The credit risk premium on a 10-year AA rated bond is 75 basis points.
The credit risk premium on a 30-year AA rated bond is 103 basis points.
Assume credit risk premium for 18 years = 10 years + additional 8 years bond maturity.
Evaluate the additional risk premium per year = (103 – 75)/(20 years) = 1.4 basis point
per year.
Estimate additional eight years of risk premium = 8 years  1.4 = 11.2 basis points.
Credit risk premium for 18 years = 10-year credit risk premium + additional 8 years
bond maturity.
Credit premium for 18 years = 75 + 11.2 = 86.2 basis points.
The expected yield on AA 18-year bond = 3.75% + (86.2/100) = 4.61%.
The estimated cost of debt = 4.61%  (1 – 0.29) = 3.27%

Step 5: Determine the WACC of SuperSky

VE % (8,600/10,600) 81.1%
VD % (2,000/10,600) 18.9%
WACC = VE %  Ke + VD %  Kd = 8.93  81.1% + 3.27  18.9% = 7.86%

Page 10 of 12
 BUSINESS FINANCE DECISIONS
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Certified Finance and Accounting Professional Examination – Summer 2021

Free cash flow valuation using risk adjusted WACC

2025 and
2021 2022 2023 2024
Year to 30 November beyond
---------------------- Rs. in million ----------------------
Revenue 3,045.1 3,121.2 3,199.3 3,279.2 3,279.2
Expenditures other than capital
allowance (2,448.0) (2,496.9) (2,546.9) (2,597.8) (2,597.8)
Profit before tax 597.1 624.3 652.4 681.4 681.4
Tax 29% (173.2) (181) (189.2) (197.6) (197.6)
Profit after taxation 423.9 443.3 463.2 483.8 483.8
Tax saved on capital
allowances *1
(see Working 1) 173.2 181.0 189.2 197.6 _*2

Capex (investment in new

aircraft) (500.0) (400.0) (300.0) (200.0) _*2

Increase in working capital

10% (see Working 2) (7.4) (7.6) (7.8) (8.0) (10.0)
Free cash flow 89.7 216.7 344.6 473.4 473.8
Terminal value (473.8/0.0786)
6,028
Discount factor at 7.86%
WACC 0.927 0.860 0.797 0.739 0.739
Present value 83.2 186.4 274.6 349.8 4,454.7
Total of present value
(Market capitalization) 5,348.7
Deduct value of debt (1,000)
Equity valuation of Wings 4,348.7 ≅ 𝟒, 𝟑𝟒𝟗

*1 Tax saved on capital allowances is shown to the extent of tax liability for the year.
*2 Nil value is shown being tax saved on capital allowance is equal to capital
expenditure for the year.

Note: The cash savings due to tax losses have been restricted to the limit of cash outflows
that can be saved in operations related to acquired company WL. There is likely chance
that remaining cash flow savings due to tax losses may be available to acquiring company
SIL. In the absence of data of SIL, such savings have been ignored.

Workings
1. Tax saved on capital allowances
2021 2022 2023 2024
----------- Rs. in million -----------
Balance brought forward 9,000.0 8,550.0 8,055.0 7,519.5
Annual capital expenditure 500.0 400.0 300.0 200.0
9,500.0 8,950.0 8,355.0 7,719.5
Capital allowance at 10% reducing
balance basis (950.0) (895.0) (835.5) (772.0)
Balance carried forward 8,550.0 8,055.0 7,519.5 6,947.5
Tax saved on capital allowances 275.5 259.6 242.3 223.9

2. Working capital
2020 2021 2022 2023 2024
------------------- Rs. in million -------------------
Revenue 2,970.8 3,045.1 3,121.2 3,199.3 3,279.2
Change in revenue 74.3 76.1 78.1 79.9

Page 11 of 12
 BUSINESS FINANCE DECISIONS
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Certified Finance and Accounting Professional Examination – Summer 2021

Increase in working
capital (10%) 7.4 7.6 7.8 8.0

(b) 500,000 Wings Ltd shares are cancelled and replaced with 1,000,000 new SuperSky
shares (500,000  2/1).

SuperSky Wings
No of equity shares in SuperSky 2,000,000 1,000,000
Control in new group 67% (2m/3m) 33% (1m/3m)

SuperSky Wings Group

--------- Rs. in million ---------
Current equity value [Part(a)] 8,600 4,349 12,949
Value of post-merger cost synergy added 3,000
Combined value of new group 15,949
New value attributed to shareholders 10,686 5,263
Increase in shareholder value resulting from
merger 2,086 914
Distribution of increase in value from synergy 24% 21%

Both sets of shareholders gain from the merger, so are likely to approve the share for
share exchange.

(The End)

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