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Exam IIA-CIA-Part3 topic 1 question 186 discussion

Actual exam question from IIA's IIA-CIA-Part3
Question #: 186
Topic #: 1
[All IIA-CIA-Part3 Questions]

A retail organization is considering acquiring a composite textile company. The retailer's due diligence team determined the value of the textile company to be $50 million. The financial experts forecasted net present value of future cash flows to be $60 million. Experts at the textile company determined their company's market value to be $55 million if purchased by another entity. However, the textile company could earn more than $70 million from the retail organization due to synergies.
Therefore, the textile company is motivated to make the negotiation successful. Which of the following approaches is most likely to result in a successful negotiation?

  • A. Develop a bargaining zone that lies between $50 million and $70 million and create sets of outcomes between $50 million and $70 million.
  • B. Adopt an added-value negotiating strategy, develop a bargaining zone between $50 million and $70 million, and create sets of outcomes between $50 million and $70 million.
  • C. Involve a mediator as a neutral party who can work with the textile company's management to determine a bargaining zone.
  • D. Develop a bargaining zone that lies between $55 million and $60 million and create sets of outcomes between $55 million and $60 million.
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Suggested Answer: D 🗳️
by nanz at May 28, 2020, 7:29 a.m.

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[Removed]
1 month, 2 weeks ago
Not sure if this is in the scope, however if the market value has been determined at 55 and a forecasted NPV of 60. it makes sense why those are the figures to work around.
upvoted 1 times
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Crazyhydra
3 months, 2 weeks ago
I dont understand this, can someone explain?
upvoted 1 times
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Inkku
3 years ago
Is this really in scope of part 3?
upvoted 1 times
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sdfgdfg345
3 years, 1 month ago
Who can explain right answer?
upvoted 2 times
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