[Sep 29, 2022] Free CIMA Strategic level CIMAPRA19-F03-1 Official Cert Guide PDF Download
CIMA CIMAPRA19-F03-1 Official Cert Guide PDF
How to book CIMA F3: Financial Strategy Exam
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- Step 2: Select the CIMA F3: Financial Strategy Exam
- Step 3: Pay the exam amount through debit card
NEW QUESTION 143
Company A is based in country A with the AS as its functional currency. It expects to receive BS20 million from Company B in settlement of an export invoice.
The current exchange rate is A$1 =B$2 and the daily standard deviation of this exchange rate = 0 5%
What is the one-day 95% VaR in AS?
- A. A$50,000
- B. A$164,500
- C. A$822,500
- D. A$82,250
Answer: D
NEW QUESTION 144
AA is considering changing its capital structure. The following information is currently relevant to AA:
The gearing rating raising the new debt finance will be 50%.
Which THREE of the following statement about the impact of AA's change in capital structure are true under Modigliani and Miler's capital structure theory with tax.
- A. The cost of debt will increase above 4%
- B. The WACC increase above 7.6
- C. The cost of equity will increase above 10%
- D. The cost of debt remain unchanged at 4%
- E. The WACC will decrease below 7.6%
- F. The cost of equity will decrease below 10%
Answer: B,D,E
NEW QUESTION 145
A listed company plans to raise $350 million to finance a major expansion programme.
The cash flow projections for the programme are subject to considerable variability.
Brief details of the programme have been public knowledge for a few weeks.
The directors are considering two financing options, either a rights issue at a 20% discount to current share price or a long term bond.
The following data is relevant:
The company's share price has fallen by 5% over the past 3 months compared with a fall in the market of 3% over the same period.
The directors favour the bond option.
However, the Chief Accountant has provided arguments for a rights issue.
Which TWO of the following arguments in favour of a right issue are correct?
- A. The administrative costs of a rights issue will be lower.
- B. The recent fall in the share price makes a rights issue more attractive to the company.
- C. The issue of bonds might limit the availability of debt finance in the future.
- D. The WACC will decrease assuming Modigliani and Miller's Theory of Capital Structure without taxes applies.
- E. The rights issue will lead to less pressure on the operating cash flows of the programme.
Answer: C,E
NEW QUESTION 146
Which of the following is NOT an advantage of a share repurchase?
- A. To allow investors to sell shares if no active market currently exists
- B. To enable the company to retain cash in the business for reinvestment
- C. To reduce the cost of capital of a company by increasing the gearing level.
- D. To return surplus cash to shareholders by avoiding a one-off dividend
Answer: B
NEW QUESTION 147
Hospital X provides free healthcare to all members of the community, funded by the central Government.
Hospital Y provides healthcare which has to be paid for by the individual patients. It is a listed company, owned by a large number of shareholders.
In comparing the above two organisations and their objectives, which THREE of the following statements are correct?
- A. X and Y will have the same primary non financial objective - provision of quality of health care.
- B. X and Y have the same primary financial objective - to maximise shareholder wealth.
- C. Only Y is likely to have a mixture of financial and non-financial objectives.
- D. The performance of X will be appraised primarily on the basis of value for money.
- E. X is a not-for-profit organisation while Y is a for-profit organisation.
Answer: A
NEW QUESTION 148
A national airline has made an offer to acquire a smaller airline in the same country.
Which of the following would be of most concern to the competition authorities?
- A. The acquisition is likely to result in significant redundancies of staff currently working for the smaller airline.
- B. The board informed a major institutional shareholder about the proposed acquisition before informing other shareholders.
- C. After the acquisition the board propose to increase prices significantly on routes where no other airlines operate.
- D. After the acquisition the board propose to reduce the number of flight destinations from the country.
Answer: C
NEW QUESTION 149
On 1 January:
* Company X has a value of $50 million
* Company Y has a value of $20 million
* Both companies are wholly equity financed
Company X plans to take over Company Y by means of a share exchange. Following the acquisition the post-tax cashflow of Company X for the foreseeable future is estimated to be $8 million each year. The post-acquisition cost of equity is expected to be 10%.
What is the best estimate of the value of the synergy that would arise from the acquisition?
- A. $30 million
- B. $100 million
- C. $10 million
- D. $60 million
Answer: C
NEW QUESTION 150
A company's main objective is to achieve an average growth in dividends of 10% a year.
In the most recent financial year:
Sales are expected to grow at 8% a year over the next 5 years.
Costs are expected to grow at 5% a year over the next 5 years.
What is the minimum dividend payout ratio in 5 years' time that would allow the company to achieve its objective?
- A. 21.7%
- B. 22.5%
- C. 27.5%
- D. 30.0%
Answer: A
NEW QUESTION 151
A company in country T is considering either exporting its product directly to customers in country P or establishing a manufacturing subsidiary in country P.
The corporate tax rate in country T is 20% and 25% tax depreciation allowances are available Which TIIRCC of the following would be considered advantages of establishing a subsidiary in country T?
- A. There are high customs cuties payable of products entering country P.
- B. There are restrictions on companies wishing to remit profit from country P
- C. The corporate tsx rate in country P is 40%.
- D. Year 1 tax depreciation allowances of 100% are available in country P.
- E. There is a double tax treaty between country T and country P.
Answer: A,D,E
NEW QUESTION 152
An unlisted company.
* Is owned by the original founders and members of their families
* Pays annual dividends each year depending on the cash requirements of the dominant shareholders.
* Has earnings that are highly sensitive to underlying economic conditions.
* Is a small business in a large Industry where there are listed companies with comparable capital structures Which of the following methods is likely to give the most accurate equity value for this unlisted company?
- A. Dividend valuation model.
- B. Discounted cash flow analysis at WACC (based on cash flows after tax but before financing) plus the market value of debt.
- C. P/E based valuation using the P/E of a similar company.
- D. Net asset valuation
Answer: A
NEW QUESTION 153
A company's current earnings before interest and taxation are $5 million.
These are expected to remain constant for the forseeable future.
The company has 10 million shares in issue which currently trade at $3.60.
It also has a $10 million long term floating rate loan.
The current interest rate on this loan is 5%.
The company pays tax at 20%.
The company expects interest rates to increase next year to 6% and it's Price/Earnings (P/E) ratio to move to 9.5 times by the end of next year.
What percentage reduction in the share price will occur by the end of next year if the interest rate increase and the P/E movement both occur?
- A. Reduction of 1%
- B. Reduction of 0%
- C. Reduction of 5%
- D. Reduction of 7%
Answer: D
NEW QUESTION 154
At the last financial year end, 31 December 20X1, a company reported:
The corporate income tax rate is 30% and the bank borrowings are subject to an interest cover covenant of 4 times.
The results are presently comfortably within the interest cover covenant as they show interest cover of 8.3 times. The company plans to invest in a new product line which is not expected to affect profit in the first year but will require additional borrowings of $20 million at an annual interest rate of 10%.
What is the likely impact on the existing interest cover covenant?
- A. Interest cover would reduce to 5 times and the covenant would NOT be breached.
- B. Interest cover would reduce to 3 times and the covenant would NOT be breached.
- C. Interest cover would reduce to 3 times and the covenant would be breached.
- D. Interest cover would reduce to 5 times and the covenant would be breached.
Answer: A
NEW QUESTION 155
A large, quoted company that is all-equity financed is planning to acquire a smaller unquoted company that is also all-equity financed.
The acquiring company's directors are using the dividend valuation model to value the target company before making an offer.
Relevant data for the target company:
* Dividends paid in the last financial year $2 million
* Book value of net assets $15 million
* Shares in issue 1 million
The acquiring company's cost of capital is 10%.
Its directors believe they can improve the target company's performance in the long term.
They estimate there will be no growth in the first year of the acquisition but from year 2 onwards there will be a 4% growth each year in perpetuity.
What is the maximum price the acquiring company should offer for each of the shares in the target company?
- A. $15.00
- B. $32.78
- C. $34.67
- D. $33.33
Answer: D
NEW QUESTION 156
A company needs to raise $20 million to finance a project.
It has decided on a rights issue at a discount of 20% to its current market share price.
There are currently 20 million shares in issue with a nominal value of $1 and a market price of $5 per share.
Calculate the terms of the rights issue.
- A. 1 new share for every 4 existing shares
- B. 1 new share for every 25 existing shares
- C. 1 new share for every 20 existing shares
- D. 1 new share for every 5 existing shares
Answer: A
NEW QUESTION 157
Using the CAPM, the expected return for a company is 10%. The market return is 7% and the risk free rate is 1%.
What does the beta factor used in this calculation indicate about the risk of the company?
- A. It has lower risk than the average market risk.
- B. It has the same risk as the average market risk.
- C. It is not possible to tell from CAPM.
- D. It has greater risk than the average market risk.
Answer: D
NEW QUESTION 158
Company A is planning to acquire Company B.
Company A's managers think they can improve the performance of Company B to the extent that its own P/E ratio should be applied to Company B's earnings.
Relevant Data:
What is the expected synergy if the acquisition goes ahead?
Give your answer to the nearest $ million.
$ ? million
- A. 7, 8000000
- B. 8, 8000000
Answer: B
NEW QUESTION 159
A wholly equity financed company has the following objectives:
1. Increase in profit before interest and tax by at least 10% per year.
2. Maintain a dividend payout ratio of 40% of earnings per year.
Relevant data:
* There are 2 million shares in issue.
* Profit before interest and tax in the last financial year was $5 million.
* The corporate income tax rate is 30%.
At the beginning of the current financial year, the company raised long term debt of $2 million at 10% interest each year.
Calculate the dividend per share that will be announced this year assuming the company achieves its objective of increasing profit before interest and tax by 10%.
- A. $0.74
- B. $0.67
- C. $1.11
- D. $1.01
Answer: A
NEW QUESTION 160
A listed company is planning to raise $21.6 million to finance a new project with a positive net present value of $5 million. The finance is to be raised via a rights issue at a 10% discount to the current share price. There are currently 100 million shares in issue, trading at $2.00 each.
Taking the new project into account, what would the theoretical ex-rights price be?
Give your answer to two decimal places.
Answer:
Explanation:
$ ?
2.02, 2.03
NEW QUESTION 161
Company A is planning to acquire Company B at a price of $ 65 million by means of a cash bid.
Company A is confident that the merged entity can achieve the same price earnings ratio as that of Company A.
What does Company A expect the value of the merged entity to be post acquisition?
- A. $156.0 million
- B. $207.0 million
- C. $187.5 million
- D. $122.5 million
Answer: D
NEW QUESTION 162
A company has announced a rights issue of 1 new share for every 4 existing shares.
Relevant data:
* The current market price per share is $10.00.
* Rights are to be issued at a 20% discount to the current price.
* The rate of return on the new funds raised is expected to be 10%.
* The rate of return on existing funds is 5%.
What is the yield-adjusted theoretical ex-rights price?
Give your answer to two decimal places.
$ ?
- A. 11.20, 11.2
- B. 11.20, 11.3
Answer: A
NEW QUESTION 163
A company is funded by:
* $40 million of debt (market value)
* $60 million of equity (market value)
The company plans to:
* Issue a bond and use the funds raised to buy back shares at their current market value.
* Structure the deal so that the market value of debt becomes equal to the market value of equity.
According to Modigliani and Miller's theory with tax and assuming a corporate income tax rate of 20%, this plan would:
- A. increase the market value of the company's equity.
- B. increase shareholder wealth.
- C. increase the company's asset beta.
- D. decrease the company's equity beta.
Answer: B
NEW QUESTION 164
Company A plans to diversify by a cash acquisition of Company B an unlisted company in another country (Country B) which operates in a different industrial sector
Company A already manufactures its product in Country B and has a loan denominated in Country B's currency
Company A regularly suffers foreign exchange losses due to volatility in the exchange rate between the two countries' currencies in recent years.
Which THREE of the following appear to be be valid justifications of this diversification decision?
- A. The diversification will enable Company A to enjoy production scale economies
- B. The diversification into another product market will lower business risk
- C. The diversification will give Company A protection from political risk
- D. The diversification will give Company A greater protection from transaction risk.
- E. The diversification will give Company A greater protection from translation risk
Answer: C,D,E
NEW QUESTION 165
Two companies that operate in the same industry have different Price/Earnings (P/E) ratios as follows:
Which of the following is the most likely explanation of the different P/E ratios?
- A. Company B has higher expected future growth than Company A.
- B. Company B has higher gearing than Company A.
- C. Company B has higher business risk than Company A.
- D. Company B has a greater profit this year than Company A.
Answer: A
NEW QUESTION 166
Company H is considering the valuation of an unlisted company which it hopes to acquire.
It has obtained the target company's financial statements.
Company H has been advised that the book value of net assets as shown in the financial statements of the target company does not provide a reliable indicator of their true value.
Advise the Board of Directors which of the following THREE statements are disadvantages of the net asset basis of valuation?
- A. The net book value of current assets is normally a reliable indicator of their realisable value.
- B. Intangible assets are often not shown in the company's financial statements.
- C. The net book value of assets is merely a record of past transactions which complies with accounting conventions.
- D. The net book value of assets can be obtained from the financial statements.
- E. The net realisable value is usually different from the net book value shown in the financial statements.
Answer: B,C,E
NEW QUESTION 167
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Salary of CIMA F3: Financial Strategy Exam
United States: 90,000 USD Europe: 77,500 Euro India: 6,750,000 INR England: 66,500 Pound
Introduction to CIMA F3: Financial Strategy Exam
For the Strategic Case Study Exam, there are three quantitative measurements: one for each professional designation topic. Only after passing all the Quantitative Examinations for the course, or when accommodation has been granted, may students take the Research Report Exam. Unique to the Research Report Exam is the option for a student to test at home. CIMA F3 exam dumps The F3 course will be taught in two days. The students will also learn how to apply finance to their business, and how you can get paid for studying. Post your thoughts, or keep your money in your pocket. Mobile learning makes preparation for certification less complicated than ever before. Invest your time and effort in preparation and you will be rewarded. People who prepare for the certification in advance. If you are studying, working or just taking time off, then this is the right time to learn finance. Explained in this guide is the process of how you can learn all the basics. Provider of financial solutions for your exam needs. Times and availability may vary.
The market is very dynamic. If you are starting a new company, then this guide will help you to successfully run it. Judge the company's financial condition. We believe that this guide will help you to run your company more efficiently. Wrong advertising will hurt your company. Anytime you need to learn about finance, you're already at the right place. Methods and techniques to use to your advantage. The attribute of your company is very important. Without making money, there is no future for the company. The key to the financial health of a business is the right team. Bind the interest of customers to your business. You can choose the best management team. Element that is needed for a successful company. Returns of the ownership of the company. Your business has to make enough money to sustain itself. Aspects of your company that is most likely to affect the financial performance of the company. Updation of the financial performance of your business. Methods to manage a company's financial performance. Possibility of short-term income for the company. The advantage of investment in business.
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