F3 Exam Questions - Real & Updated Questions PDF
Pass Guaranteed Quiz 2022 Realistic Verified Free CIMA
NEW QUESTION 187
A company has stable earnings of S2 million and its shares are currently trading on a price earnings multiple {PIE) of 10 times. It has10 million shares in issue.
The company is raising S4 million debt finance to fund an expansion of its existing business which is forecast to increase annual earnings straight away by 25% and then remain at that level for the foreseeable future. The corporation tax rate is 20%. It is expected that the P/E will reduce to 8 times over the next year.
What is the most likely change in shareholder wealth resulting from this plan?
- A. Shareholder wealth will increase by $3.2 million.
- B. Shareholder wealth will increase by $4 million.
- C. No change in shareholder wealth.
- D. Shareholder wealth will increase by $5 million
Answer: B
NEW QUESTION 188
Which TWO of the following situations offer arbitrage opportunities?
A)
B)
C)
D)
- A. Option D
- B. Option B
- C. Option C
- D. Option A
Answer: B
NEW QUESTION 189
Company W is a manufacturing company with three divisions, all of which are making profits:
* Division A which manufactures cars
* Division B which manufactures trucks
* Division C which manufactures agricultural machinery
Company W is facing severe competitive pressure in all of its markets, and is currently operating with a high level of gearing Company W's latest forecasts suggest that it needs to raise cash to avoid breaching loan covenants on its existing debt finance in 6 months' time In a recent strategy review. Divisions A and B were identified as being the core divisions of Company W The management of Division C is known to be interested in the possibility of a management buy-out.
Company Z is known to be interested in making a takeover bid for Company W's truck manufacturing division A rival to Company W has recently successfully demerged its business, this was well received by the Financial markets Which of the following exit strategies will be most suitable for company W?
- A. Demerger of Division C
- B. Management buy-out of Division C
- C. Closure of Division
- D. Sale of Division B to Company Z
Answer: B
NEW QUESTION 190
B has a S3 million loan outstanding on which the interested rate is reset every 6 months for the following 6 month and the interested is payable at the end of that 6 month period. The next 6 monthly reset period starts in
3 months and the treasurer of B thinks interested rates are likely to raise between and then.
Current 6-month rates are 6.4% and the treasurer can get a rate of 6.9% for a 6-month forward rate agreement (FRA) starting in 3 months time. By transacting an TRA the treasurer can lock in a rate today of 6.9%.
If interested rates are 7.5% in 3 months' time, what will the net amount payable be?
Give your answer to the nearest thousand dollars.
Answer:
Explanation:
104
NEW QUESTION 191
Select the most appropriate divided for each of the following statements:
Answer:
Explanation:
NEW QUESTION 192
It is now 1 January 20X0.
Company V, a private equity company, is considering the acquisition of 40% of the equity of Company A for a total amount of $15 million.
Company A has been established to develop a new type of engine which will be launched at the end of 20X1.
Company A is forecasting that the new engine will result in free cash flows to equity of $2m in its first year of operation and that this will rise by 8% per year for the foreseeable future.
The new engine is the only commercial activity that Company A is involved in.
Company V intends to sell its stake in Company A when the new engine is launched.
Company A has a cost of equity of 12%.
Assuming that Company V receives an amount that reflects the present value of their shares in company A.
what is the estimated annual rate of return to Company V from this investment? (To the nearest %)
- A. 3%
- B. 16%
- C. 10%
- D. 33%
Answer: C
NEW QUESTION 193
The primary objective of a public sector entity is to ensure value for money is generated.
Value for money is defined as performing an activity so as to simultaneously achieve economy, efficiency and effectiveness
Efficiency is defined as:
- A. spending funds so as to achieve the objectives of the entity.
- B. obtaining maximum output from minimum inputs
- C. obtaining quality inputs at minimum cost.
- D. performing activities in the least amount of time possible
Answer: D
NEW QUESTION 194
A company is considering either directly exporting its product to customers in a foreign country or setting up a subsidiary in the foreign country to manufacture and supply customers in that country.
Details of each alternative method of supplying the foreign market are as follows:
There is an import tax on product entering the foreign country of 10% of sales value.
This import duty is a tax-allowable deduction in the company's domestic country.
The exchange rate is A$1.00 = B$1.10
Which alternative yields the highest total profit after taxation?
- A. Foreign subsidiary: A$35,000
- B. Domestic: A$33,750
- C. Foreign subsidiary: A$38,500
- D. Domestic: A$41,250
Answer: A
NEW QUESTION 195
A venture capitalist invests in a company by means of buying:
* 9 million shares for $2 a share and
* 8% bonds with a nominal value of $2 million, repayable at par in 3 years' time.
The venture capitalist expects a return on the equity portion of the investment of at least 20% a year on a compound basis over the first 3 years of the investment.
The company has 10 million shares in issue.
What is the minimum total equity value for the company in 3 years' time required to satisify the venture capitalist's expected return?
Give your answer to the nearest $ million.
$ million.
- A. 34, 35, 34000000, 35000000
- B. 34, 36, 34000000, 35000000
Answer: A
NEW QUESTION 196
The primary objective of a public sector entity is to ensure value for money is generated.
Value for money is defined as performing an activity so as to simultaneously achieve economy, efficiency and effectiveness Efficiency is defined as:
- A. spending funds so as to achieve the objectives of the entity.
- B. obtaining maximum output from minimum inputs
- C. obtaining quality inputs at minimum cost.
- D. performing activities in the least amount of time possible
Answer: D
NEW QUESTION 197
A company's gearing is well below its optimal level and therefore it is considering implementing a share re-purchase programme.
This programme will be funded from the proceeds of a planned new long-term bond issue.
Its financial projections show no change to next year's expected earnings.
As a result, the company plans to pay the same total dividend in future years.
If the share re-purchase is implemented, which THREE of the following measures are most likely to decrease?
- A. The Weighted Average Cost of Capital
- B. The cost of equity
- C. The number of shares in issue
- D. The interest cover
- E. The gearing, based on book value (debt ÷ (debt + equity))
- F. Next year's dividend per share
Answer: A,C,D
NEW QUESTION 198
A UK company enters into a 5 year borrowing with bank P at a floating rate of GBP Libor plus 3% It simultaneously enters into an interest rate swap with bank Q at 4.5% fixed against GBP Libor plus 1.5% What is the hedged borrowing rate, taking the borrowing and swap into account?
Give your answer to 1 decimal place.
Answer:
Explanation:
7.5%
NEW QUESTION 199
Select the most appropriate divided for each of the following statements:
Answer:
Explanation:
NEW QUESTION 200
A is a listed company. Its shares trade on a stock market exhibiting semi-strong form efficiency.
Which of the following is most likely to increase the wealth of A's shareholders?
- A. Announcing that the final dividend will remain unchanged from the previous 3 years.
- B. Announcing that a non-current asset will be revalued in the statement of financial position.
- C. Announcing that inventory will be impaired.
- D. Announcing that a project will be undertaken generating a positive net present value.
Answer: D
NEW QUESTION 201
ZZZ is a listed company based in Brinland. a European country. It is the largest owner and operator of residential care homes for elderly people in Brinland
Most of the residential care homes in Brinland are run by small private operators, and the standards of cafe are extremely variable However. 22Z has developed a good reputation because its client service is considered to be extremely good even though its prices are higher than those of most of its competitors.
ZZZ has expanded rapidly in the last few years, partly by acquisition and partly by organic growth consequently, the company's share price now stands at a record high, and the dividend declared at the end of the most recent accounting period was 10% higher than the previous year's dividend.
The Brinland government has recently set up a regulatory body to monitor the residential care homes industry. The regulatory body is considering introducing a variety of regulations to improve the customer experience in the industry. Following a period of consultation and investigation, the regulatory body is expected to announce a range of new regulations in the near future.
The directors of ZZZ are concerned that the new regulations may adversely affect their company
Which THREE of the following new regulations are likely to have the greatest negative impact on ZZTs performance?
- A. Imposition of a one-off "windfall" tax to fund training courses for carers across the industry
- B. Fines for companies that miss specified service level targets
- C. Monopoly controls, forcing large operators to dispose of some care homes
- D. Price controls, setting a maximum price that providers can charge
- E. Imposition of a minimum staff to client ratio.
Answer: B,C,E
NEW QUESTION 202
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