CIMAPRA19-F03-1 Free Exam Questions and Answers PDF Updated on Jan-2023
Latest CIMAPRA19-F03-1 Exam Dumps Recently Updated 346 Questions
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.
NEW QUESTION 22
KKL is a listed sports clothing company with three separate business units. KKL is seeking to sell TT', one of these business units TTP cwns a new. brand of trail running shoes that have Droved hugely popular with lone distance runners.
The management team of TTP are frustrated by the constraints imposes b/ KKL in managing tie brand and developing. the bus ness and they believe that TTF has huge growth potential.
The management team of TTP have approached KKL with a proposal to purchase 1~P through a management layout (MDO). KKL has accepted this proposal as TTP has not proved to be a good fit' with the rest of the business and has agreed on the selling price.
Which THREE of the following factors a-e mast Likely to affect the success of the MBO?
- A. Searing sufficient. funding for the MBO.
- B. The ability the TTP management team to develop the brand and achieve the expected growth.
- C. The motivation of the TTP management team to invest in future growth.
- D. The constraints imposed by KKL managing TTF's brand.
- E. The ability of the TTF management team to take over the head office functions successfully.
Answer: A,B,E
NEW QUESTION 23
Holding cash in excess of business requirements rather than returning the cash to shareholders is most likely to result in lower:
- A. vulnerability to a takeover bid.
- B. net profit.
- C. liquidity.
- D. return on equity.
Answer: D
NEW QUESTION 24
A national rail operating company has made an offer to acquire a smaller competitor.
Which of the following pieces of information would be of most concern to the competition authorities?
- A. After the acquisition, the board proposes to increase prices on some routes not serviced by other rail operators.
- B. After the acquisition, the board proposes to withdraw some of the less profitable services.
- C. The acquisition is likely to result in significant redundancies of staff currently working for the smaller rail operator.
- D. The board informed a major institutional shareholder about the proposed acquisition before informing other shareholders.
Answer: A
NEW QUESTION 25
On 1 January 20X1, a company had:
* Cost of equity of 10 0%.
* Cost of debt of 5.0%
* Debt of $100Mmilion
* 100 million $1 shares trading at $4.00 each.
On 1 February 20X1:
* The company's share police fell to $3.00.
* Debt and the cost of debt remained unchanged
The company does not pay tax.
Under Modigliani and Miller's theory without lax. what is the best estimate of the movement in the cost of equity as a result of the fall in ne share price?
- A. It will rise to 11.2%.
- B. It will fall to 9.3%.
- C. It will rise to 10.3%.
- D. It will stay the same at 10.0%.
Answer: D
NEW QUESTION 26
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 27
A company raised fixed rate bank finance together with an interest rate swap for the same term and same principal value to pay floating receive fixed rate interest on an annual basis.
Which THREE of the following statements are correct?
- A. The swap contract is normally a contract between a company and a bank.
- B. The company has effectively obtained floating rate debt.
- C. Under the swap, interest is exchanged every year.
- D. On the first day of this arrangement, the company receives the principal borrowed from the bank and pays this across to the swap counterparty.
- E. LIBID (London Interbank Bid Rate) is normally used as the reference rate for determining interest due under the swap.
Answer: A,B,C
NEW QUESTION 28
A company's gearing (measured as debt/(debt + equity)) is currently 60% and it is investigating whether an optimal gearing structure exists within the industry.
It has analysed the capital structure of similar companies in the industry and it would appear that there is evidence supporting the traditional theory of capital structure.
Companies with the lowest WACC in the industry have gearing of around 45% to 50%.
Which of the following actions would result in the company achieving a more optimal capital structure?
- A. Using retained cash to undertake a buyback of some of its equity.
- B. Refinancing to replace some of its short term debt with long term debt.
- C. Undertaking a rights issue of equity to repay some of its debt.
- D. Increasing the level of dividend to return more cash to shareholders.
Answer: C
NEW QUESTION 29
DFG is a successful company and its shares are listed on a recognised stock exchange. The company's gearing ratio is currently in line with the industry average and the directors of DFG do not want to increase the company's financial risk. The company does not carry a large cash balance and its shareholders are not expected to be willing to support a rights issue at this time
LMB is a small services company owned and managed by a small board of directors who are going to retire within the next year
DFG wishes to purchase LMB and has approached LMB's owners, who are broadly open to the proposal, to discuss the bid and the consideration to be offered by DFG. LMB's owners explain to DFG that they are also keen to defer any tax liabilities they would be subject to on receipt of the consideration.
Based on the information provided, which of the following types of consideration would be most suitable to finance the acquisition?
- A. DFG shares for the current value of LMB
- B. Loan stock in DFG for the current value of LMB
- C. DFG shares for a percentage of the current value of LMB plus a three year earn-out arrangement
- D. Cash for the current value of LMB
Answer: A
NEW QUESTION 30
Company A is a large well-established listed entertainment company and Company B is a small unlisted company specializing in providing online media streaming.
Company A has a gearing ratio of 60% (using book values) and interest cover of 2.
Company A is considering making an offer for Company B, either a cash offer financial by raising additional debt finance or a share-for-share exchange.
Which of the following is most likely to occur if Company A offers a share-for exchange rather than offering cash finance by raising debt?
- A. Earnings per share would be higher.
- B. Divided per share would be higher.
- C. Gearing would be lower.
- D. There would be no dilution f of control.
Answer: C
NEW QUESTION 31
A company plans a four-year project which will be financed by either an operating lease or a bank loan.
Lease details:
* Four year lease contract.
* Annual lease rentals of $45,000, paid in advance on the 1st day of the year.
Other information:
* The interest rate payable on the bank borrowing is 10%.
* The capital cost of the project is $200,000 which would have to be paid at the beginning of the first year.
* A salvage or residual value of $100,000 is estimated at the end of the project's life.
* Purchased assets attract straight line tax depreciation allowances.
* Corporate income tax is 20% and is payable at the end of the year following the year to which it relates.
A lease-or-buy appraisal is shown below:
Which THREE of the following items are errors within the appraisal?
- A. The salvage value has been included within the lease option
- B. The bank loan repayments should be included
- C. Using the 10% discount rate is incorrect
- D. Tax relief on lease payments have not been lagged correctly
- E. The project's operating cashflows should be included
- F. Lease payments are timed incorrectly
Answer: A,C,D
NEW QUESTION 32
Assume today is 31 December 20X1.
A listed mobile phone company has just launched a new phone which is proving to be a great success.
As a direct result of the product's success, earnings are forecast to increase by:
* 5% a year in each of years 20X2 - 20X6
* 3% from 20X7 onwards
Market analysts were very excited to hear the news of the success of the product and future growth forecasts.
Assuming a semi-efficient market applies, which of the following company valuation methods is likely to give the best estimate of the company's equity value today?
- A. Today's share price x number of shares in issue.
- B. P/E valuation based on the company's long term P/E and earnings for the year ended 31 December
20X1. - C. Discounted free cash flow using the company's forecast growth rates.
- D. Today's share price x number of shares in issue + retained earnings.
Answer: A
NEW QUESTION 33
A large multi-divisional company in the food processing and distribution business is conducting a strategic review. The divisions all compete in the same market.
The sale of one of its underperforming food processing divisions to the divisional management team is currently being considered. The purchase by the divisional management team will require venture capital finance.
Which THREE of the following are likely to influence the multi-divisional company's decision on whether or not to sell the under-performing division to the management team?
- A. The specific conditions imposed on the management team by the venture capital provider.
- B. The divisional management team has detailed confidential information about the operation of the other divisions.
- C. The divisional management team has skills and experience that are important for the future successful operation of other divisions.
- D. The ability of the management team to raise the finance required to complete the purchase of the division at a reasonable price.
- E. The quality of the management team and its ability to manage the divested division successfully.
Answer: B,C,D
NEW QUESTION 34
A company plans to raise $12 million to finance an expansion project using a rights issue.
Relevant data:
* Shares will be offered at a 20% discount to the present market price of $15.00 per share.
* There are currently 2 million shares in issue.
* The project is forecast to yield a positive NPV of $6 million.
What is the yield-adjusted Theoretical Ex-Rights Price following the announcement of the rights issue?
- A. $14.00
- B. $11.00
- C. $16.00
- D. $9.00
Answer: C
NEW QUESTION 35
Companies A, B, C and D:
* are based in a country that uses the K$ as its currency.
* have an objective to grow operating profit year on year.
* have the same total levels of revenue and cost.
* trade with companies or individuals in the eurozone. All import and export trade with companies or individuals in the eurozone is priced in EUR.
Typical import/export trade for each company in a year are as follows:
Which company's growth objective is most sensitive to a movement in the EUR/K$ exchange rate?
- A. Company D
- B. Company C
- C. Company B
- D. Company A
Answer: C
NEW QUESTION 36
A company is located in a single country. The company manufactures electrical goods for export and for sale in its home country. When exporting, it invoices in its customers' currency. What currency risks is the company exposed to?
- A. Translation and economic risks.
- B. Transaction risk only
- C. Transaction and economic risks
- D. Transaction, economic and translation risks.
Answer: D
NEW QUESTION 37
An entity prepares financial statements to 31 December each year. The following data applies:
1 December 20X0
* The entity purchased some inventory for $400,000.
* In order to protect the inventory against adverse changes in fair value the entity entered into a futures contract to sell the inventory for a fixed price on 31 January 20X1.
* The entity designated this contract as a fair value hedge of the value of the inventory.
31 December 20X0
* The inventory had a fair value of $480,000 and the futures contract had a fair value of $75,000 (a financial liability).
What will be the impact on the statement of profit or loss and other comprehensive income for the year ended 31 December 20X0 in respect of the change in the value of the inventory and the futures contract?
- A. A loss of $75,000 will be recognised in profit or loss.
- B. A net gain of $5,000 will be recognised in other comprehensive income.
- C. A net gain of $5,000 will be recognised in profit or loss.
- D. A loss of $75,000 will be recognised in other comprehensive income.
Answer: C
NEW QUESTION 38
A company is considering hedging the interest rate risk on a 3-year floating rate borrowing linked to the 12-month risk-free rate.
If the 12-month risk-free rate for the next three years is 2%, 3% and 4%, which of the following alternatives would result in the lowest average finance cost for the company over the three years?
- A. Enter into an interest rate swap at 3.1% fixed against 12-month risk-free rate.
- B. Enter into a zero-cost collar with a floor of 2.9% and a ceiling of 4%.
- C. Do not hedge.
- D. Enter into an interest rate cap at an annual premium of 0.533% and a cap of 3%,
Answer: C
NEW QUESTION 39
Listed Company A has prepared a valuation of an unlisted company. Company B. to achieve vertical integration Company A is intending to acquire a controlling interest in the equity of Company B and therefore wants to value only the equity of Company B.
The assistant accountant of Company A has prepared the following valuation of Company B's equity using the dividend valuation model (DVM):
Where:
* S2 million is Company B's most recent dividend
* 5% is Company B's average dividend growth rate over the last 5 years
* 10% is a cost of equity calculated using the capital asset pricing model (CAPM), based on the industry average beta factor
Which THREE of the following are valid criticisms of the valuation of Company B's equity prepared by the assistant accountant?
- A. The beta factor used may not reflect Company B's financial risk.
- B. An unlisted company cannot use the capital asset pricing model to calculate its cost of equity
- C. The 5% growth rate may not reflect the future growth of Company B.
- D. It is better to use the present value of earnings rather than present value of dividends to value a controlling interest
- E. The DVM calculation should use Company A's cost of equity rather than Company B's cost of equity
Answer: A,C,E
NEW QUESTION 40
Company A is planning to acquire Company B by means of a cash offer. The directors of Company B are prepared to recommend acceptance if a bid price can be agreed. Estimates of the net present value (NPV) of future cash flows for the two companies and the combined group post acquisition have been prepared by Company A's accountant. There are as follows:
What is the maximum price that Company A should offer for the shares in Company B?
Give your answer to the nearest $ million
Answer:
Explanation:
150
NEW QUESTION 41
Company HJK is planning to bid for listed company BNM
Financial data for BNM for the financial year ended 31 December 20X1:
HJK is not forecasting any growth in these figures for the foreseeable future Profit and cost data above should be assumed to be equivalent to cash flow data when answenng this question Which THREE of the following approaches would be most appropriate for HJK to use to value the equity of BNM?
- A. Share price x number of shares in issue
- B. Share price x number of shares in issue plus retained profits
- C. Cash flows of S14 million discounted at the cost of equity
- D. Cash flows of $30 million (= S40 million net of tax at 25%) discounted at WACC minus the value of debt
- E. Cash flows of S24 million discounted at the cost of equity
Answer: A,B,D
NEW QUESTION 42
Company M's current profit before interest and taxation is $5.0 million.
It has a long-term 10% corporate bond in issue with a nominal value of $10 million.
The rate of corporate tax is 25%.
It plans to continue to pay out 50% of its earnings in dividends and earnings are expected to grow by 3% each year in perpetuity.
Its cost of equity is 10%.
Using the dividend growth model, advise the Board of Directors of Company M which of the following provide a reasonable valuation of Company M's equity?
- A. $50.1 million
- B. $44.1 million
- C. $22.1 million
- D. $73.6 million
Answer: C
NEW QUESTION 43
DFG is a successful company and its shares are listed on a recognised stock exchange. The company's gearing ratio is currently in line with the industry average and the directors of DFG do not want to increase the company's financial risk. The company does not carry a large cash balance and its shareholders are not expected to be willing to support a rights issue at this time LMB is a small services company owned and managed by a small board of directors who are going to retire within the next year DFG wishes to purchase LMB and has approached LMB's owners, who are broadly open to the proposal, to discuss the bid and the consideration to be offered by DFG. LMB's owners explain to DFG that they are also keen to defer any tax liabilities they would be subject to on receipt of the consideration.
Based on the information provided, which of the following types of consideration would be most suitable to finance the acquisition?
- A. DFG shares for the current value of LMB
- B. Loan stock in DFG for the current value of LMB
- C. DFG shares for a percentage of the current value of LMB plus a three year earn-out arrangement
- D. Cash for the current value of LMB
Answer: A
NEW QUESTION 44
An all equity financed company reported earnings for the year ending 31 December 20X1 of $5 million.
One of its financial objectives is to increase earnings by 5% each year.
In the year ending 31 December 20X2 it financed a project by issuing a bond with a $1 million nominal value and a coupon rate of 7%.
The company pays corporate income tax at 30%.
If the company is to achieve its earnings target for the year ending 31 December 20X2, what is the minimum operating profit (profit before interest and tax) that it must achieve?
- A. $7.50 million
- B. $5.25 million
- C. $8.40 million
- D. $7.57 million
Answer: D
NEW QUESTION 45
Which THREE of the following would be most important if a hospital wishes to review the effectiveness of its services?
- A. Staff costs compared to previous years.
- B. Revenue generated from car park charges.
- C. The proportion of surgical procedures that are deemed to be successful.
- D. Average waiting times for treatment.
- E. Patient satisfaction ratings.
Answer: C,D,E
NEW QUESTION 46
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