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CIMA F3 certification exam is targeted at finance professionals who are looking to advance their careers in the field of financial management. This includes finance managers, financial analysts, investment managers, and other finance professionals who are responsible for making strategic financial decisions. F3 exam is designed to test the candidate's ability to apply financial management theories and concepts to real-world scenarios.
NEW QUESTION # 10
A company is preparing an integrated report according to the International <IR> Framework as issued by the International Integrated Reporting Council.
Which THREE of the following should be included in the report?
- A. An explanation of how the organisation's governance structure supports its ability to create value in the short, medium and long term.
- B. A comparison of the key elements of its financial statements with those of its main competitor.
- C. A detailed analysis of the organisation's business model.
- D. A summary of the key issues discussed by directors in main board meetings.
- E. The challenges and uncertainties that the organisation is likely to encounter in pursuing its strategy.
Answer: A,C,E
NEW QUESTION # 11
A company's latest accounts show profit after tax of $20.0 million, after deducting interest of $5.0 million. The company expects earnings to grow at 5% per annum indefinitely.
The company has estimated its cost of equity at 12%, which is included in the company WACC of 10%.
Assuming that profit after tax is equivalent to cash flows, what is the value of the equity capital?
Give your answer to the nearest $ million.
$ ? million
- A. 100, 300000000
- B. 300, 300000000
Answer: B
NEW QUESTION # 12
The ex div share price of a company's shares is $2.20.
An investor in the company currently holds 1,000 shares.
The company plans to issue a scrip dividend of 1 new share for every 10 shares currently held.
After the scrip dividend, what will be the total wealth of the shareholder?
Give your answer to the nearest whole $.
$ ? .
Answer:
Explanation:
2200
NEW QUESTION # 13
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. The performance of X will be appraised primarily on the basis of value for money.
- B. Only Y is likely to have a mixture of financial and non-financial objectives.
- C. X is a not-for-profit organisation while Y is a for-profit organisation.
- D. X and Y have the same primary financial objective - to maximise shareholder wealth.
- E. X and Y will have the same primary non financial objective - provision of quality of health care.
Answer: A,C,E
NEW QUESTION # 14
A company has convertible bonds in issue.
The following debt is apply (31 December 20X0):
* Conversion ratio- 20 shares for each $130 bond.
* Current share price - $4 50
* Expected annual growth in share price - 5%
Advise the bond Holder at which date the convers on would be worthwhile?
- A. 31 December 20X2
- B. 31 December 20X0
- C. 31 December 20X3
- D. 31 December 20X1
Answer: C
NEW QUESTION # 15
LPM Company is based in Country C. whose currency is the CS
It has entered Into a contract to buy a machine in three months' time. The supplier is overseas and the payment is to be made in a different currency from the CS The treasurer at LPM Company is considering using a money market hedge to manage the transaction risk associated with a payment.
The assumptions of interest rate parity apply
Which THREE of the following statements concerning the use of a money market hedge for this supplier payment are correct*?
- A. lt avoids the need to find immediate finance
- B. It can be tailored to match the size of the payment
- C. It offers a significantly better outcome than a forward contract
- D. It manages transaction risk
- E. Any opportunity to benefit from future exchange rate movements is lost.
Answer: B,C,D
NEW QUESTION # 16
The directors of the following four entities have been discussing dividend policy:
Which of these four entities is most likely to have a residual dividend policy?
- A. D
- B. A
- C. B
- D. C
Answer: C
NEW QUESTION # 17
A company has:
* $7 million market value of equity
* $5 million market value of debt
* WACC of 9.375%
* Corporate income tax rate of 15%
According to Modigliani and Miller's theory of capital structure with tax, what is the ungeared cost of equity?
- A. 8.79%
- B. 14.52%
- C. 10.00%
- D. 10.27%
Answer: C
NEW QUESTION # 18
Two unlisted companies TTT and YYY are being valued. The companies have similar capital structures and risk profiles and operate in the same industry sector It is easier to value TTT than to value YYY because there have recently been several well-publicised private sales of TTT shares.
Relevant company data:
What is the best estimate of YYY's share price?
- A. $0.60
- B. $1.20
- C. $0.94
- D. $0.68
Answer: B
NEW QUESTION # 19
A company is considering taking out $10.000,000 of floating rate bank borrowings to finance a new project. The current rate available to the company on floating rate barrowings is 8%. The borrowings contain a covenant based on an interested cover of 5 times.
The project is expected to generate the following results:
At what interest rate on the floating rate borrowings is the bank covenant first breached?
- A. 10.0%
- B. 8.0%
- C. 11.0%
- D. 9.4%
Answer: C
NEW QUESTION # 20
A company aims to increase profit before interest and tax (PBIT) each year.
The company reports in A$ but has significant export sales priced in B$.
All other transactions are priced in A$.
In 20X1, the company reported:
In 20X2, the only changes expected are:
* An increase in export prices of 10%, but no change to units sold.
* A rise in the value of the B$ to A$/B$ 2.500 (that is, A$ 1 = B$ 2.5) Is it likely that the company would still meet its objective to grow PBIT between 20X1 and 20X2?
- A. No, PBIT would fall by A$ 150 million.
- B. Yes, PBIT would increase by A$ 48 million.
- C. Yes, PBIT would increase by A$ 150 million.
- D. No, PBIT would fall by A$ 48 million.
Answer: D
NEW QUESTION # 21
A profit-seeking company intends to acquire another company for a variety of reasons, primarily to enhance shareholder wealth.
Which THREE of the following offer the greatest potential for enhancing shareholder wealth?
- A. Creating new opportunities for employees.
- B. Acquiring Intellectual Property assets.
- C. Exploiting production synergies.
- D. Achieving greater cultural diversity.
- E. Achieving more press coverage for the company.
- F. Elimination of existing competition.
Answer: B,C,F
NEW QUESTION # 22
Company C is a listed company. It is currently considering the acquisition of Company D.
The original founder of Company C currently owns 52% of the shares.
Alternative forms of consideration for Company D being considered are as follows:
* Cash payment, financed by new borrowing
* issue of new shares in Company C
Which of the following is an advantage of a cash offer over a share-for exchange from the viewpoint of the original founder of Company C?
- A. A share for share exchange would result in a significant change in control of Company C whereas a cash offer would not.
- B. A share-for-share exchange would require the approval of the Competition Authorities but a cash offer would not.
- C. A cash offer would result in a lower gearing ratio therefore reduce the weighted overage cost of capital whereas a cash offer would not.
- D. A share-for-share exchange would require the approval shareholders in Company C but a cash offer would not.
Answer: A
NEW QUESTION # 23
Which THREE of the following remain unchanged over the life of a 10 year fixed rate bond?
- A. The amount payable on maturity
- B. The yield
- C. The coupon rate
- D. The nominal value
- E. The market value
Answer: A,C,D
NEW QUESTION # 24
A company is planning to repurchase some of its shares. Relevant details are as follows:
* 100 million shares in issue
* Current share price $5
* 5 million shares to be repurchased
* 10% repurchase premium
* Repurchased shares to be cancelled
What would you expect the share price after the repurchase to be?
Give your answer to two decimal places.
$ ?
- A. 4.97, 4.98
- B. 4.97, 3.98
Answer: A
NEW QUESTION # 25
Company R is a major food retailer. It wishes to acquire Company S, a food manufacturer.
Company S currently supplies many stores owned by Company R with food products that it manufactures.
Company S is of similar size to Company R but has a lower credit rating.
Which of the following is most likely to be a synergistic benefit to R on purchasing S?
- A. Lower cost of borrowing due to the acquistion of a company with a different credit rating.
- B. Cost savings due to reducing the range of products manufactured by Company S.
- C. Reduced competition resulting in the ability to raise retail selling prices for food products.
- D. Savings due to a reduction in purchase costs and more control over the value chain.
Answer: D
NEW QUESTION # 26
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