[Jun-2024] 100% Guarantee Download F3 Exam Dumps PDF Q&A
Kickstart your Career with Real Updated Questions
CIMA CIMAPRA19-F03-1 exam is a part of the Financial Strategy module in the CIMA Professional Qualification. F3 exam is designed to test the candidates' knowledge and understanding of the concepts and techniques used in financial strategy, which is a critical component of any business's success. F3 exam is divided into two sections, each containing objective test questions, and the candidates are required to pass both sections to obtain the certification.
NEW QUESTION # 237
Which THREE of the following methods of business valuation would give a valuation of the equity of an entity, rather than the value of the whole entity?
- A. Forecast future cash flows to equity, discounted at the cost of equity.
- B. Total earnings x appropriate price-earnings ratio.
- C. Expected dividend in one year's time / (cost of equity - growth rate).
- D. Non-current assets, plus current assets, minus current liabilities
- E. Forecast future cash flows to all Investors, discounted at the weighted average cost of capital.
Answer: A,B,C
NEW QUESTION # 238
A company with a market capitalisation of S50million is considering raising $1 million debt to fund a new 10-year capital investment protect
The value of this issue is considered to be small in comparison to the company's market capitalisation
The company is considering whether to raise the debt finance by either a "bond private placing' or a 'public bond issue.
Which THREE of the following statements are correct?
- A. The company's credit rating will be a key element in determining the interest rate payable and the potential success of either the public bond issue or the bond private placing
- B. An initial public bond issue can be arranged relatively quickly whereas a bond private placing can take up to a year to arrange.
- C. An average investor is made aware of a potential initial public bond issue whereas the average investor is only made aware of a bond private placing after it has occurred.
- D. An initial public bond issue will be administratively complex and relatively expensive for the relatively small amount of debt being raised whereas a bond private placing will be relatively less complex
- E. An initial public bond issue does not need to be underwritten whereas a bond private placing must be underwritten.
Answer: B,D
NEW QUESTION # 239
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 # 240
Which of the following statements about the tax impact on debt finance is correct?
- A. Debt instruments issued with fixed and floating charges do not attract tax relief on interest paid.
- B. Interest on debt is deducted from post-tax profits.
- C. Interest on debt is deducted from pre-tax profits.
- D. Preference share dividends attract tax relief in the same way as debenture interest.
Answer: C
NEW QUESTION # 241
A company plans to acquire new machinery.
It has two financing options; buy outright using a bank loan, or a finance lease.
Which of the following is an advantage of a finance lease compared with a bank loan?
- A. The lessor provides maintenance of the asset.
- B. The interest rate offered might be more favourable because the lessor has the security of the asset.
- C. It is "off-balance sheet" and will not affect the company's gearing.
- D. Tax depreciation allowances may be passed on to the company by the lessor.
Answer: B
NEW QUESTION # 242
Company C invests heavily in Research and Development an need to raise $45 million to finance future projects. It has decided to use equity finance raised by a tender offer, The following tender offers have been received from potential investors:
Company C wishes to select an offer price that will project shareholders from a significant dilution of control but still raise the required amount of finance.
What offer price should Company C's select?
- A. $4.25
- B. $4.00
- C. $4.75
- D. $4.50
Answer: D
NEW QUESTION # 243
XCV can borrow at either 9.5% fixed or the risk-free rate plus 1.3%.
XCV wishes to borrow at a variable rate and thinks that a swap may enable it to do so cheaply BNM can borrow the same principal sum as XCV It can borrow at 10 5% fixed or the risk-free rate plus 2 1 % BNM wishes to raise fixed rate debt XCV and BNM have agreed to use an interest rate swap They will share any savings equally Calculate the effective swap rate that will be paid by XCV.
Give your answer to one decimal place.
Answer:
Explanation:
Pending
NEW QUESTION # 244
A company is concerned that a high proportion of its debt portfolio consists of variable rate finance with an interest rate of LIBOR ' 1 .0%.
It is considering using an interest rate swap to reduce interest rate risk out is concerned about additional finance cost this might create.
A bank has quoted swap rates of 3% 3.5% against LIBOR.
A bank has quoted swap rates of 3% 3.5% against LIBOR.
Is an interest rate swap likely to be beneficial to the company at current LIBOR rates?
- A. No, because it would be cheaper to repay variable rate finance aid enter into new fixed rate finance than to enter into an interest rate swap.
- B. Yes, because interest cost will decrease with the interest rate swap in place.
- C. No, because interest cost will increase with the interest rate swap in place.
- D. Yes, because it will have lower interest rate risk and interest cost remains the same.
Answer: D
NEW QUESTION # 245
A Venture Capital Fund currently holds a significant shareholding in a large private company as a result of funding a recent management buyout. It plans to exit this investment in 5 years time at a significant profit.
Which THREE of the following exit mechanisms are most likely to be preferred by the Venture Capital Fund?
- A. The private company obtains a stock market listing on a recognised exchange within the next 5 years.
- B. The management team has an option to buy the Venture Capital Fund's shares for their nominal value which can be exercised in 5 years time.
- C. The Venture Capital Fund has a legal entitlement to sell its shareholding to any third party investor if the company has not obtained a stock market listing within 5 years.
- D. The Venture Capital Fund has an option to sell its shareholding to the company at twice its original cost which can be exercised in 5 years time.
- E. The management team agrees to buy back the Venture Capital Funds shareholding in 5 years time at its original cost.
Answer: A,C,D
NEW QUESTION # 246
A large, listed company is planning a major project that should greatly improve its share price in the long term.
These plans require a significant capital cost that the company plans to finance by debt.
All of the debt options being considered are for the same duration of time.
Which of the following sources of debt finance is likely to be the most expensive for the company over the full term of the debt?
- A. Convertible bonds
- B. Bank loan
- C. A finance lease
- D. Bonds
Answer: A
NEW QUESTION # 247
A company has:
* A price/earnings (P/E) ratio of 10.
* Earnings of $10 million.
* A market equity value of $100 million.
The directors forecast that the company's P/E ratio will fall to 8 and earnings fall to $9 million.
Which of the following calculations gives the best estimate of new company equity value in $ million following such a change?
- A.
- B.
- C.
- D.
Answer: B
NEW QUESTION # 248
The directors of a financial services company need to calculate a valuation of their company's equity in preparation for an upcoming initial Public Offering (IPO) of shares. At a recent board meeting they discussed the various methods of business valuation.
The Chief Executive suggested using a Price-earing (P./E) method of valuation, but the finance Director argued that a valuation based on forecast cash flows to equity would be more appropriate.
Which THREE of the following are advantages of valuation based on forecast cash flows to equity, compared to a valuating using a price earnings methods?
- A. It incorporates the time value of money.
- B. It avoids the problem of having to forecast a sustainable level of future growth.
- C. Using cash is theoretically superior to using profits in a valuation calculation.
- D. It give on estimate of the likely shareholder value that will be created.
- E. The calculations are much simpler.
Answer: A,C,E
NEW QUESTION # 249
The Board of Directors of Company T is considering a rights issue to fund a new investment opportunity which has a zero NPV.
The Board of Directors wishes to explain to shareholders what the theoretical impact on their wealth will be as a result of different possible actions during the rights issue.
Which THREE of the following statements in respect of theoretical shareholder wealth are true?
- A. If shareholders partially exercise their rights and sell the remaining rights entitlement there will be no impact on their wealth.
- B. If shareholders sell their entire rights entitlement there will be no impact on their wealth.
- C. If shareholders exercise their full rights there will be no impact on their wealth.
- D. If the shareholders only partially exercise their rights and allow the remainder to lapse there will be no impact on their wealth.
- E. If the shareholders allow their rights to lapse (do nothing) there will be no impact on their wealth.
Answer: A,B,C
NEW QUESTION # 250
Company P is a pharmaceutical company listed on an alternative investment market.
The company is developing a new drug which it hopes to market in approximately six years' time.
Company P is owned and managed by a group of doctors who wish to retain control of the company. The company operates from leased laboratories with minimal fixed assets.
Its value comes from the quality of its research staff and their research.
The company currently has one approved drug which generates sufficient cashflow to cover day to day operations but not sufficient for major new research and development.
Company P wish to raise debt finance to develop the new drug.
Recommend which of the following types of debt finance would be most appropriate for Company P to help finance the development of this new drug.
- A. 6% Eurobond repayable at par in 5 years' time.
- B. 3% Commercial Paper.
- C. 4% Convertible bond with a conversion ratio of 350 ordinary shares per bond.
- D. 5% Bond repayable at par in 7 years' time.
Answer: C
NEW QUESTION # 251
Which TWO of the following statements about debt instruments are correct?
- A. A zero coupon will eliminate the tax shield effect on debt payments.
- B. If corporation tax rates rise, the tax shield effect on debenture interest will be reduced.
- C. The true cost of servicing debt instruments to the company is the post-tax cost of debt.
- D. Changes in corporation tax rates will have no effect on the tax shield of fixed rate debentures.
Answer: A,D
NEW QUESTION # 252
Which of the following is NOT an advantage of a share repurchase?
- A. To reduce the cost of capital of a company by increasing the gearing level.
- B. To return surplus cash to shareholders by avoiding a one-off dividend
- C. To allow investors to sell shares if no active market currently exists
- D. To enable the company to retain cash in the business for reinvestment
Answer: D
NEW QUESTION # 253
Three companies are quoted on the New York Stock Exchange. The following data applies:
Which of the following statements is TRUE?
- A. Companies A and C have the same business risk
- B. Company A has the greatest business risk
- C. Companies A and B have the same capital structure
- D. Companies A and B have the same business risk
Answer: D
NEW QUESTION # 254
On 31 October 20X3:
* A company expected to agree a foreign currency transaction in January 20X4 for settlement on 31 March
20X4.
* The company hedged the currency risk using a forward contract at nil cost for settlement on 31 March
20X4.
* The transaction was correctly treated as a cash flow hedge in accordance with IAS 39 Financial Instruments: Recognition and Measurement.
On 31 December 20X3, the financial year end, the fair value of the forward contract was $10,000 (asset).
How should the increase in the fair value of the forward contract be treated within the financial statements for the year ended 31 December 20X3?
- A. Not recognised in 20X3 as the gain will be offset by a loss on the hedged transaction.
- B. A $10,000 profit will be recognised within other comprehensive income.
- C. Not recognised in 20X3 as the forward contract is not settled until after the year end.
- D. A $10,000 profit will be recognised within the Income Statement.
Answer: B
NEW QUESTION # 255
XYZ has a variable rate loan of $200 million on which it is paying interest of Liber ' 3%.
XYZ entered into a swap with AG bank to convert this to a fixed rate 8% loan. AB bank charges an annual commission of 0.4% for making this arrangement
Calculate the net payment from KYZ to AB bank at the end of the first year if Libor was 2% throughout the year.
Give your answer in $ million, to one decimal place.
- A. 22.9
- B. 22.8
Answer: B
Explanation:
NEW QUESTION # 256
Country X's short-term interest rates are slightly higher than its long-term rates. Which THREE of the following statements are correct?
- A. This difference may reverse.
- B. A long-term borrower would save by taking out a short-term loan and then refinancing
- C. Interest rates will definitely fall.
- D. Interest rates are expected to fall.
- E. Country X's currency is expected to strengthen in the long-term.
Answer: A,B,E
NEW QUESTION # 257
A company intends to sell one of its business units. Company W, by a management buyout (MBO). A selling price of S200 million has been agreed.
The managers are discussing with a bank and a venture capital company (VCC) the following financing proposal.
The VCC requires a minimum return on its equity investment In the MBO of 35% a year on a compound basis over 5 years. What is the minimum total equity value of Company W in 5 years time in order to meet the VCC's required return? Give your answer to one decimal place.
- A. 0
- B. 1
Answer: A
NEW QUESTION # 258
Company A is subject to a takeover bid from Company B, both companies operate in the same industry and each of them demand a significant market share Company B h3S made an of an of $5 per share to the shareholders of Company A.
The directors of Company A do not believe the takeover would be in the best interests of the stakeholders and other stakeholders of Company A due to the following reruns
1. Company B has recently taken ever several ether companies resulting in them breaking up the company and se ling on the assets.
2 The directors of Company A believe the offer of $5 per snare undervalues tie company The directors of Company A are therefore keen to prevent the bid from going ahead Which THREE of the following defence strategies could be used by the directors of Company Air this situation?
- A. Offer the company to an alternative While Knight bidder.
- B. Inform shareholders of the potential current value of the non-current assets including intangibles, to show that their true value is higher than the bid value.
- C. Refer the bid to the Competition Authorizes because of the risk of a large number of employee redundancies if Company B's Did were to be successful
- D. Appeal to their own shareholders that the company should not be broken up because i: has strong growth prospects.
- E. Give existing shareholders the right to buy bonds in the future.
Answer: A,C,D
NEW QUESTION # 259
......
CIMA CIMAPRA19-F03-1 (F3 Financial Strategy) Exam is an essential certification for finance professionals who are looking to advance their careers in the field of financial management. F3 exam covers a wide range of topics related to financial management, and successful completion of F3 exam is a significant achievement for any professional. Candidates who pass the F3 Financial Strategy exam will be equipped with the knowledge and skills necessary to make informed decisions in the field of financial management.
CIMA F3 (Financial Strategy) certification exam is an essential exam for individuals who want to pursue a career in finance. F3 Financial Strategy certification provides a comprehensive understanding of financial management, including financial strategy formulation and implementation. The CIMA F3 exam is designed to test the candidate's knowledge of financial strategy and how to apply it in real-world scenarios.
Earn Quick And Easy Success With F3 Dumps: https://www.testvalid.com/F3-exam-collection.html
Top-Class F3 Question Answers Study Guide: https://drive.google.com/open?id=1JbtnZDU2qrwPpiWkEoQ_YNY3s-nQKj34