Pass Your CIMAPRA19-F03-1 Dumps as PDF Updated on 2024 With 435 Questions
CIMA CIMAPRA19-F03-1 Real Exam Questions and Answers FREE
CIMA F3 Certification Exam is a challenging and rewarding exam that offers finance professionals the opportunity to develop their skills and knowledge in financial strategy. It is a valuable certification that can enhance career prospects and open up new opportunities in the finance industry.
NEW QUESTION # 116
A company's statement of financial position includes non-current assets which are leased, the tax regime follows the accounting treatment.
Which cash flows should be discounted when evaluating the cost of lease finance?
- A. Lease payments, tax relief on implied interest and tax relief on straight-line account depreciation.
- B. Lease payments and straight-line accounting depreciation.
- C. Lease payments and implied interest.
- D. Lease payments, implied interested and straight-line accounting deprediation.
Answer: B
NEW QUESTION # 117
A listed entertainment and media company produces and distributes films globally. The company invests heavily in intellectual property in order to create the scope for future film projects. The company has five separate distribution companies, each managed as a separate business unit The company is seeking to sell one of its business units in a management buy-out (MBO) to enable it to raise finance for proposed new investments The business unit managers have been in discussions with a bank and venture capitalists regarding the financing for the MBO The venture capitalists are only prepared to invest a mixture of debt and equity and have suggested the following:
The venture capitalists have stated that they expect a minimum return on their equity investment of 30% a year on a compound basis over the first 5 years of the MBO No dividends will be paid during this period.
Advise the MBO team of the total amount due to the venture capitalist over the 5-year period to satisfy their total minimum return?
- A. $146 39 million
- B. $155.14 million
- C. $120 14 million
- D. $111 39 million
Answer: D
NEW QUESTION # 118
Which of the following explains an aim of integrated reporting in accordance with The International <IR> Framework as issued by the International Integrated Reporting Council?
- A. To highlight the need for greater reporting of performance to stakeholders in a greater level of detail than at present.
- B. To integrate the various accepted accounting practices of member bodies into a single, unified code of accounting principles.
- C. To highlight the separation of strategy, governance and financial performance in a social, environmental and economic context.
- D. To support decision making and actions that focus on creating value over the short, medium and long term.
Answer: D
NEW QUESTION # 119
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
- A. 0
- B. 1
Answer: B
Explanation:
NEW QUESTION # 120
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.
$ ?
- A. 2.02, 2.03
- B. 2.02, 1.03
Answer: A
NEW QUESTION # 121
It is now 1 January 20X0.
Company V, a private equity company, is considering the acquisition of 40% of the equity of Company A for a total amount of $15 million.
Company A has been established to develop a new type of engine which will be launched at the end of 20X1.
Company A is forecasting that the new engine will result in free cash flows to equity of $2m in its first year of operation and that this will rise by 8% per year for the foreseeable future.
The new engine is the only commercial activity that Company A is involved in.
Company V intends to sell its stake in Company A when the new engine is launched.
Company A has a cost of equity of 12%.
Assuming that Company V receives an amount that reflects the present value of their shares in company A.
what is the estimated annual rate of return to Company V from this investment? (To the nearest %)
- A. 3%
- B. 10%
- C. 33%
- D. 16%
Answer: B
NEW QUESTION # 122
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:
- A. 5% decrease
- B. 5% increase
- C. 35% increase
- D. 35% decrease
Answer: A
NEW QUESTION # 123
PTT has a number of subsidiary companies around the world, including FTT based in Europe and CTT based in Indonesia CTT purchases all of us raw materials from FTT CTT processes these materials and the resulting products are exported to several different countries CTT pays FTT in the Indonesian currency.
Indonesia's inflation is higher than that of FTTs home country
Which of the following statements are correct?
Select ALL that apply
- A. FTT could ask for ail payments to K to be made in its home currency, which would reduce exposure to currency risk
- B. FTT could investigate whether it could import anything from Indonesia in order to create a natural hedge.
- C. FTT will be exposed to transaction risks as the Indonesian currency will appreciate over time because of the expected inflation rates
- D. FTT will be exposed to transaction risk The Indonesian currency that it receives Is likely to decline over time because of anticipated inflation
- E. CTT will be exposed to translation risk because FTT will almost certainly have to reflect the changing prices in its selling price and it will be difficult for CTT to make a profit
Answer: A,C,D
NEW QUESTION # 124
Company P is a large unlisted food-processing company.
Its current profit before interest and taxation is $4 million, which it expects to be maintainable in the future.
It has a $10 million long-term loan on which it pays interest of 10%.
Corporate tax is paid at the rate of 20%.
The following information on P/E multiples is available:
Which of the following is the best indication of the equity value of Company P?
- A. $24 million
- B. $40 million
- C. $80 million
- D. $48 million
Answer: A
NEW QUESTION # 125
WW is a quoted manufacturing company. The Finance Director has addressed the shareholders during WW's annual general meeting-She has told the shareholders that WW raised equity during the year and used the funds to repay a large loan that was maturing, thereby reducing WW's gearing ratio At the conclusion of the Finance Director's speech one of the shareholders complained that it had been foolish for WW to have used equity to repay debt The shareholder argued that the Modigliani and Miller model (with tax) offers proof that debt is cheaper than equity when companies pay tax on their profits.
Which THREE arguments could the Finance Director have used in response to the shareholder?
- A. A lower gearing ratio will result in an increase in the value of the company
- B. Reducing the gearing ratio has reduced the financial risk of WW which will benefit shareholders
- C. The Modigliani and Miller model would only be valid in practice if WW's shareholders were aware of the model and believed in its validity
- D. The shareholder was confusing the cost of capital with shareholder wealth
- E. WW was approaching a debt covenant limit and it was therefore important to reduce gearing.
- F. A lower gearing ratio creates greater flexibility for WW in the future
Answer: A,B,E
NEW QUESTION # 126
Integrated reporting is designed to make visible the capitals on which the organisation depends, and how the organisation uses those capitals to create value in the short, medium and long term
Which THREE of the following capitals are specifically identified in the Integrated Reporting <IR> Framework?
- A. Manufactured
- B. Financial
- C. Human
- D. Research and Development
- E. Community
Answer: A,C
NEW QUESTION # 127
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?
- A. It has greater risk than the average market risk.
- B. It is not possible to tell from CAPM.
- C. It has lower risk than the average market risk.
- D. It has the same risk as the average market risk.
Answer: A
NEW QUESTION # 128
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 $20 million at an annual interest rate of 10%.
What is the likely impact on the existing interest cover covenant?
- A. Interest cover would reduce to 5 times and the covenant would be breached.
- B. Interest cover would reduce to 3 times and the covenant would be breached.
- C. Interest cover would reduce to 5 times and the covenant would NOT be breached.
- D. Interest cover would reduce to 3 times and the covenant would NOT be breached.
Answer: C
NEW QUESTION # 129
A company gas a large cash balance but its directors have been unable to identify any positive NPV projects to invest in. Which THREE of the following are advantages of a share repurchase, compared with a one-off large dividend?
- A. It means that the company will be able to pay lower total dividends in the future.
- B. The shareholder can choose whether to take the cast or not.
- C. It returns cash to shareholders so that they can choose hew to spend It
- D. It increases the number of shares issue.
- E. It will not create an expectation for future increased dividends.
Answer: B,C,E
NEW QUESTION # 130
Companies L. M N and O:
* are based in a country that uses the RS as its currency
* have an objective to grow operating profit year on year
* have the same total levels of revenue and cost
* trade with companies or individuals in the United States. All import and export trade with companies or individuals in the United States is priced in US$.
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 O
- B. Company L
- C. Company M
- D. Company N
Answer: B
NEW QUESTION # 131
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. 9.4%
- C. 8.0%
- D. 11.0%
Answer: D
NEW QUESTION # 132
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?
- A. Pay a one-off special dividend.
- 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. Refer the bid to the country's competition authorities.
Answer: B
NEW QUESTION # 133
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Passing the CIMA F3 exam is a crucial step towards achieving the CIMA qualification and becoming a Chartered Global Management Accountant (CGMA). As a CGMA, finance professionals are recognized for their expertise in financial management and strategy, making them highly sought after in the business world. With the CIMA F3 exam, candidates demonstrate their ability to create and implement effective financial strategies, enabling them to take on senior management roles in finance and accounting departments.
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