F3 Dumps To Pass CIMA Strategic level Exam in One Day (Updated 346 Questions) [Q50-Q74]

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F3 Dumps To Pass CIMA Strategic level Exam in One Day (Updated 346 Questions)

F3 Exam Brain Dumps – Study Notes and Theory

NEW QUESTION 50
RR has agreed to sell goods to XX for S20.000 XX will pay when the goods are delivered in 6 months time.
RR’s home currency is the £- The current exchange rate is 4.3 £/S. The projected inflation rate for the S is
2.8%, and for the E 4 6%.
When RR receives payment for its goods, what will the value be to the nearest pound?

£87.506

£85,243

£86 760

£84.520

NEW QUESTION 51
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 $.

NEW QUESTION 52
A company generates and distributes electricity and gas to households and businesses.
Forecast results for the next financial year are as follows:
The Industry Regulator has announced a new price cap of $1.50 per Kilowatt.
The company expects this to cause consumption to rise by 10% but costs would remained unaltered.
The price cap is expected to cause the company’s net profit to fall to:

$47.5 million profit

$27.5 million profit

$20.0 million profit

$35.0 million loss

NEW QUESTION 53
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?

Earnings per share would be higher.

Divided per share would be higher.

Gearing would be lower.

There would be no dilution f of control.

NEW QUESTION 54
Which TIIRCC of the following are most likely be primary objectives for a newly established, unincorporated entity in the service sector?

Increasing the dividend payment year on year

Increasing Revenue

Providing consistently high levels service quality

Maintaining sufficient liquidity in the business to avoid overtrading

Reaching an optimum capital structure

NEW QUESTION 55
The Board of Directors of a listed company is considering the company’s dividend/retentions policy.
The inflation rate in the economy is currently high and is expected to remain so for the foreseeable future.
The board are unsure what impact the high level of inflation might have on the dividend policy.
Which THREE of the following statements are true?

The high inflation rate does not need to be considered when determining the dividend policy.

Consideration should be given to the fact that shareholders will have a desire for real growth in dividend.

Retained earnings for reinvestment will have to earn a return in excess of the inflation level.

The impact of inflation on the cash flows should be considered when formulating the dividend policy.

In periods of high inflation 100% of earnings should always be paid out as dividends so that shareholders can protect their wealth against the impact of inflation.

NEW QUESTION 56
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?

It has greater risk than the average market risk.

It has lower risk than the average market risk.

It has the same risk as the average market risk.

It is not possible to tell from CAPM.

NEW QUESTION 57
A company is considering whether to lease or buy an asset.
The following data applies:
* The bank will charge interest at 7.14% per annum
* The asset will cost $1 million
* Tax-allowable depreciation is available on a straight line basis over 5 years
* There is no residual value
* Corporate tax is paid at 30% in the year when the profit is earned
What is the NPV of the buy option?
Give your answer to the nearest $000.
$ ?

740

640

NEW QUESTION 58
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?

$73.6 million

$22.1 million

$44.1 million

$50.1 million

NEW QUESTION 59
Company W has received an unwelcome takeover bid from Company B.
The offer is a share exchange of 3 shares in Company B for 5 shares in Company W or a cash alternative of $5.70 for each Company W share.
Company B is approximately twice the size of Company W based on market capitalisation. Although the two companies have some common business interested the main aim of the bid is diversification for Company B.
Company W has substantial cash balances which the directors were planning to use to fund an acquisition.
These plans have not been announced to the market.
The following share price information is relevant.

Which of the following would be the most appropriate action by Company W’s directors following receipt of this hostile bid?

Change the Articles of Association to increase the percentage of shareholder votes required to approve a takeover.

Refer the bid to the country’s competition authorities.

Write to shareholders explaining fully why the company’s share price is under valued.

Pay a one-off special dividend.

NEW QUESTION 60
Three companies are quoted on the New York Stock Exchange. The following data applies:

Which of the following statements is TRUE?

Company A has the greatest business risk

Companies A and B have the same capital structure

Companies A and C have the same business risk

Companies A and B have the same business risk

NEW QUESTION 61
A company generates operating profit of $17.2 million, and incurs finance costs of $5.7 million.
It plans to increase interest cover to a multiple of 5-to-1 by raising funds from shareholders to repay some existing debt. The pre-tax cost of debt is fixed at 5%, and the refinancing will not affect this.
Assuming no change in operating profit, what amount must be raised from shareholders?
Give your answer in $ millions to the nearest one decimal place.

NEW QUESTION 62
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?

10.0%

11.0%

8.0%

9.4%

NEW QUESTION 63
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?

Yes, PBIT would increase by A$ 48 million.

No, PBIT would fall by A$ 48 million.

Yes, PBIT would increase by A$ 150 million.

No, PBIT would fall by A$ 150 million.

NEW QUESTION 64
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)

Option A

Option B

Option C

Option D

NEW QUESTION 65
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.
$ ?

2.02, 2.03

2.02, 1.03

NEW QUESTION 66
A listed company is financed by debt and equity.
If it increases the proportion of debt in its capital structure it would be in danger of breaching a debt covenant imposed by one of its lenders.
The following data is relevant:

The company now requires $800 million additional funding for a major expansion programme.
Which of the following is the most appropriate as a source of finance for this expansion programme?

Retained earnings

Private placement of a bond

Rights issue

Bank overdraft

NEW QUESTION 67
Company J plans to acquire Company K, an unlisted company whose equity is to be valued using a P/E ratio approach.
A listed company has been identified which is very similar to Company K and which can be used as a proxy.
However, the growth prospects of Company K are higher than those of the proxy.
The Directors of Company J are aware that certain adjustments will be necessary to the proxy company’s P/E ratio in order to obtain a more reliable valuation.
The following adjustments have been agreed:
* 20% due to Company K being unlisted.
* 15% to allow for the growth rate difference.
The total adjustment to the proxy p/e ratio is:

5% increase

5% decrease

35% increase

35% decrease

NEW QUESTION 68
The following information relates to Company A’s current capital structure:

Company A is considering a change in the capital structure that will increase gearing to 30:70 (Debt:Equity).
The risk -free rate is 3% and the return on the market portfolio is expected to be 10%.
The rate of corporate tax is 25%
Using the Capital Asset Pricing Model, calculate the cost of equity resulting from the proposed change to the capital structure.

11.4%

12.3%

9.3%

10.1%

NEW QUESTION 69
A private company was formed five years ago and is currently owned and managed by its five founders. The founders, who each own the same number of shares have generally co-operated effectively but there have also been a number of areas where they have disagreed The company has grown significantly over this period by re-investing its earnings into new investments which have produced excellent returns The founders are now considering an Initial Public Offering by listing 70% of the shares on the local stock exchange Which THREE of the following statements about the advantages of a listing are valid?

Reduces agency conflict

Increases dividend payouts

Helps access to wider sources of finance.

Provides an exit route for the founders

Increases the profile and reputation of the business.

NEW QUESTION 70
RST wishes to raise at least $40 million of new equity by issuing up to 10 million new equity shares at a minimum price of $3.00 under an offer for sale by tender. It receives the following tender offers:

What is the maximum amount that RST can raise by this share issue?
(Give your answer to the nearest $ million).

NEW QUESTION 71
ADC is planning to acquire DEF in order to benefit from the expertise of DEF’s owner ‘managers Both are Listed companies. ADC is trying to decide whether to offer cash or shares in consideration for DEF’s shares.
Which THREE of the following are advantages to ABC of offering shares to acquire CEF?

It shares tie benefits of future growth with the DCT shareholder.

It dilutes ownership in ABC.

It incentivises DEF to continue creating value for the combined group

It results in a tax saving for ABC.

The risk of poor future performance of the acquisition is shared with the DEF company shareholder.

It preserves liquidity

NEW QUESTION 72
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$50,000

A$164,500

A$82,250

A$822,500

NEW QUESTION 73
A company wishes to raise new finance using a rights issue. The following data applies:
* There are 10 million shares in issue with a market value of $4 each
* The terms of the rights will be 1 new share for 4 existing shares held
* After the rights issue, the theoretical ex-rights price (TERP) will be $3.80 Assuming all shareholders take up their rights, how much new finance will be raised ?
Give your answer to one decimal place.

NEW QUESTION 74
A company is considering whether to lease or buy an asset.
The following data applies:
* The bank will charge interest at 7.14% per annum
* The asset will cost $1 million
* Tax-allowable depreciation is available on a straight line basis over 5 years
* There is no residual value
* Corporate tax is paid at 30% in the year when the profit is earned
What is the NPV of the buy option?
Give your answer to the nearest $000.
$ ?