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CIMA F3 (F3 Financial Strategy) Certification Exam is an important certification exam that is designed to test the financial strategy skills of individuals who are interested in pursuing a career in finance. It covers a range of topics, including financial analysis, risk management, investment analysis, and financial planning, and is divided into two sections that are equally important. F3 Financial Strategy certification is recognized globally and is highly valued by employers, making it an excellent choice for individuals who want to work in the finance industry.
CIMA F3: Financial Strategy is a professional level exam designed to test a student’s knowledge and understanding of key concepts surrounding financial strategy in modern organizations. F3 exam is part of the Chartered Institute of Management Accountants (CIMA) syllabus and is critical for students who want to work in the financial management sector. It is also necessary for individuals who want to move up the ranks in their current organizations.
CIMA F3 Certification Exam is a challenging and rewarding experience for individuals who want to advance their career in finance. F3 exam provides a comprehensive understanding of financial management principles and techniques, and equips candidates with the skills needed to succeed in the modern business world. Whether you are a finance professional seeking to enhance your knowledge or an aspiring financial strategist, the CIMA F3 Certification Exam is a valuable qualification that can open doors to new opportunities and career growth.
NEW QUESTION # 88
A company has a covenant on its 5% long term corporate bond.
* Covenant - The earnings must not fall below $7 million
The bond has a nominal value of $60 million.
It is currently trading at 80% of its nominal value.
The projected earnings before interest and taxation for next year are $11.5 million.
The company retains 80% of its earnings. It pays tax at 20%.
Advise the Board of Directors which of the following covenant conditions will apply next year?
- A. The earnings will be = $5.44 million (The covenant will be breached).
- B. The earnings will be = $7.28 million (The covenant will not be breached).
- C. The earnings will be = $11.50 million (The covenant will not be breached).
- D. The earnings will be = $6.80 million (The covenant will be breached).
Answer: D
NEW QUESTION # 89
Company A is planning to acquire Company B at a price of $ 65 million by means of a cash bid.
Company A is confident that the merged entity can achieve the same price earnings ratio as that of Company A.
What does Company A expect the value of the merged entity to be post acquisition?
- A. $122.5 million
- B. $187.5 million
- C. $156.0 million
- D. $207.0 million
Answer: A
NEW QUESTION # 90
Company Z has identified four potential acquisition targets: companies A, B, C and D.
Company Z has a current equity market value of $590 million.
The price it would have to pay for the equity of each company is as follows:
Only one of the target companies can be acquired and the consideration will be paid in cash.
The following estimations of the new combined value of Company Z have been prepared for each acquisition before deduction of the cash consideration:
Ignoring any premium paid on acquisition, which acquisition should the directors pursue?
- A. B
- B. D
- C. A
- D. C
Answer: B
NEW QUESTION # 91
Which TIIRCC of the following are most likely be primary objectives for a newly established, unincorporated entity in the service sector?
- A. Maintaining sufficient liquidity in the business to avoid overtrading
- B. Reaching an optimum capital structure
- C. Increasing Revenue
- D. Providing consistently high levels service quality
- E. Increasing the dividend payment year on year
Answer: A,C
NEW QUESTION # 92
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:
- A. $20.0 million profit
- B. $35.0 million loss
- C. $27.5 million profit
- D. $47.5 million profit
Answer: D
NEW QUESTION # 93
A listed company in the retail sector has accumulated excess cash.
In recent years, it has experienced uncertainly with forecasting the required level of cash for capital expenditure due to unpredictable economic cycles.
Its excess cash is on deposit earning negligible returns.
The Board of Directors is considering the company's dividend policy, and the need to retain cash in the company.
Which THREE of the following are advantages of retaining excess cash in the company?
- A. The company will be in a position to respond promptly to unexpected investment opportunities.
- B. The excess cash is earning a negligible return.
- C. Retaining excess cash may make the company vulnerable to hostile takeover.
- D. Liquidity problems are less likely to be experienced if there is a downturn in business.
- E. The market may interpret the return of excess cash as a sign of weak growth prospects.
Answer: A,D,E
NEW QUESTION # 94
Company C has received an unwelcome takeover bid from Company P.
Company P is approximately twice the size of Company C based on market capitalisation.
Although the two companies have some common business interests, the main aim of the bid is diversification for Company P.
The offer from Company P is a share exchange of 2 shares in Company P for 3 shares in Company C.
There is a cash alternative of $5.50 for each Company C share.
Company C 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. All prices are in $.
Which of the following would be the most appropriate action by Company C's directors following receipt of this hostile bid?
- A. Refer the bid to the country's competition authorities.
- B. Write to shareholders explaining fully why the company's share price is under valued.
- C. Change the Articles of Association to increase the percentage of shareholder votes required to approve a takeover.
- D. Pay a one-off special dividend.
Answer: B
NEW QUESTION # 95
Which of the following statements is true of a spin-off (or demerger)?
- A. Increases the risk of a takeover bid for the core entity.
- B. Changes the ownership structure of the core entity by introducing new shareholders.
- C. Allows investors to identify the true value of the demerged business.
- D. Raises finance to fund new projects.
Answer: C
NEW QUESTION # 96
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.
Answer:
Explanation:
$ ? million
300, 300000000
NEW QUESTION # 97
Companies L. M N and O:
* are based in a country that uses the RS 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 United States. All import and export trade with companies or individuals in the United States is priced in US$.
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 USS / RS exchange rate?
- A. Company M
- B. Company N
- C. Company O
- D. Company L
Answer: D
NEW QUESTION # 98
A company has just received a hostile bid. Which of the following response strategies could be considered?
- A. Change the Articles of Association to amend voting rights
- B. Approach a White Knight
- C. Revalue non-current assets
- D. Poison pill strategy
Answer: B
NEW QUESTION # 99
An all equity financed company plans an issue of new ordinary shares to the general public to raise finance for a new project The following data applies:
* 10 million ordinary shares are currently in issue with a market value of S3 each share
* The new project will cost S2.88 million and is expected to give a positive NPV of S1 million
* The issue will be priced at a AaA discount to the current share price.
What gam or loss per share will accrue to the existing shareholders?
- A. Gain of 0.18
- B. Loss of $0.18
- C. Loss of $0.08
- D. Gain of $0.08
Answer: D
NEW QUESTION # 100
Company M plans to bid for Company J. Company M has 20 million shares in issue and a current share price of $10.00 before publicly announcing the planned takeover. Company J has 10 million shares in issue and a current share price of $4.00.
The directors of Company M are considering an all-share bid of 1 Company M shares for 2 Company J shares.
Synergies worth $20m are expected from the acquisition.
What is the likely change in wealth for Company M's shareholders (in total) if the bid is accepted?
Give your answer to the nearest $ million.
$ ? million
- A. 0
- B. 1
Answer: A
NEW QUESTION # 101
The directors of a multinational group have decided to sell off a loss-making subsidiary and are considering the following methods of divestment:
1. Trade sale to an external buyer
2. A management buyout (MBO)
The MBO team and the external buyer have both offered the same price to the parent company for the subsidiary.
Which of the following is an advantage to the parent company of opting for a MBO compared to a trade sale as the preferred method of divestment?
- A. Retain the know edge of key management.
- B. Avoid a hostile reaction from key management.
- C. Raise the cash more quickly.
- D. Focus on the core competencies of the business
Answer: B
NEW QUESTION # 102
Company M is a listed company in a highly technical service industry.
The directors are considering making a cash offer for the shares in Company Q, an unquoted company in the same industry.
Relevant data about Company Q:
* The company has seen consistent growth in earnings each year since it was founded 10 years ago.
* It has relatively few non-current assets.
* Many of the employees are leading experts in their field. A recent exercise suggested that the value of the company's human capital exceeded the value of its tangible assets.
The directors and major shareholders of Company Q have indicated willingness to sell the company.
Before negotiations become too advanced, the directors of Company M are considering the benefits to their company that would follow the acquisition.
Which THREE of the following are the most likely benefits of the acquisition to Company M's shareholders?
- A. Reduction of risk through diversification.
- B. Improved asset backing for borrowing due to the acquisition of intangible assets.
- C. Improve earnings per share (EPS).
- D. Gain economies of scale.
- E. Access to technical expertise.
Answer: C,D,E
NEW QUESTION # 103
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.
Answer:
Explanation:
$ ? million
7.5, 7.50
NEW QUESTION # 104
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.
$ ?
Answer:
Explanation:
45.2
NEW QUESTION # 105
A company based in Country A with the A$ as its functional currency requires A$500 million 20-year debt finance to finance a long-term investment The company has a high credit rating, but has not previously issued corporate bonds which are listed on the stock exchange Which THREE of the following are advantages of issuing 20 year bonds compared with simply borrowing for a 20 year period?
- A. Greater availability of debt of 20-year duration
- B. Lower arrangement costs
- C. Less administrative effort to arrange the new finance
- D. Lower interest rate
- E. Larger capital market
Answer: A,D,E
NEW QUESTION # 106
At the last financial year end, 31 December 20X1, a company reported:
The corporate income tax rate is 30% and the bank borrowings are subject to an interest cover covenant of 4 times.
The results are presently comfortably within the interest cover covenant as they show interest cover of 8.3 times. The company plans to invest in a new product line which is not expected to affect profit in the first year but will require additional borrowings of $20 million at an annual interest rate of 10%.
What is the likely impact on the existing interest cover covenant?
- A. Interest cover would reduce to 5 times and the covenant would NOT be breached.
- B. Interest cover would reduce to 3 times and the covenant would be breached.
- C. Interest cover would reduce to 5 times and the covenant would be breached.
- D. Interest cover would reduce to 3 times and the covenant would NOT be breached.
Answer: A
NEW QUESTION # 107
An aerospace company is planning to diversify into car manufacturing.
Relevant data:
What is the the cost of equity to be used in the WACC for the project appraisal?
Give your answer in percentage, as a whole number.
- A. 18%
- B. 19%
Answer: B
NEW QUESTION # 108
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 # 109
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