CIMA F3 Exam Dumps

HHH Company has a fixed rate loan at 10.0%, but wishes to swap to variable. It can borrow at the risk-free rate +8%. The bank is currently quoting swap rates of 3.1% (bid) and 3.5% (ask). What net rate will HHH Company pay if it enters into the swap?

Company A has just announced a takeover bid for Company B. The two companies arelarge companies in the same industry_ The bid is considered to be hostile.Company B's Board of Directors intends to try to prevent the takeover as they do notconsider it to be in the best interests of shareholdersWhich THREE of the following are considered to be legitimate post-offer defences?

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?

SUP is a large supermarket chain. It produces many 'own brand' goods in Country S where the parent company is located. These goods are sold in SUP's supermarkets in Country S as well as being sold at a 'transfer price' to SUP companies located in foreign countries for sale in the SUP supermarkets located in that country. Which of the following factors is the most important for SUP from a lax planning and compliance viewpoint when setting prices for the 'own brand' goods sold to other group companies'?

Company R is a major food retailer. It wishes to acquire Company S, a food manufacturer. Company S currently supplies many stores owned by Company R with food products that it manufactures. Company S is of similar size to Company R but has a lower credit rating. Which of the following is most likely to be a synergistic benefit to R on purchasing S?

The long-term prospects for inflation in the UK and the USA are 1% and 4% per annum respectively.The GBP/USD spot rate is currently GBP/USD1.40Using purchasing power parity theory, what GBP/USD spot rate would you expect to see insix months’ time?

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 company has stable earnings of S2 million and its shares are currently trading on a priceearnings multiple {PIE) of 10 times. It has10 million shares in issue.The company is raising S4 million debt finance to fund an expansion of its existingbusiness which is forecast to increase annual earnings straight away by 25% and thenremain at that level for the foreseeable future. The corporation tax rate is 20%. It isexpected that the P/E will reduce to 8 times over the next year.What is the most likely change in shareholder wealth resulting from this plan?

Company ADE is an unlisted company; it needs to raise a significant amount of finance tofund future expansion. The directors are considering listing the company on the local stockexchange The following discussions have taken place between some of the directors:Director A - We consider a public issue of bonds in the capital markets, we don't need tolist to issue the bonds which will save time and money.Director B - We should list on the Alternative Investment Market (AIM) and not the mainmarket to avoid any regulatory requirementsDirector C - We should remain unlisted; we can access an unlimited amount of equityfinance through a rights issueDirector D - Listing will increase Company ADE's ability to raise new equity and debtfinance in the future.Director E - If we list, Company ADE will be a more likely target for a takeover than if weremain unlisted.Which TWO of the directors' statements are correct?

A company is undertaking a lease-or-buy evaluation, using the post-tax cost of bankborrowing as the discount rate.Details of the two alternatives are as follows:Buy option: • To be financed by a bank loan • Tax depreciation allowances are available on a reducing-balance basis • Assets depreciated on a straight-line basisLease option: • Finance lease • Maintenance to be paid by the lessee • Tax relief available on interest payments and book depreciationWhich THREE of the following are relevant cashflows in the lease-or-buy appraisal?

Which TIIRCC of the following are most likely to reduce the long term credit rating co a company?

The value of a call option will increase because of:

ZZZ is a listed company based in Brinland. a European country. It is the largest owner and operator of residential care homes for elderly people in Brinland Most of the residential care homes in Brinland are run by small private operators, and the standards of cafe are extremely variable However. 22Z has developed a good reputation because its client service is considered to be extremely good even though its prices are higher than those of most of its competitors. ZZZ has expanded rapidly in the last few years, partly by acquisition and partly by organic growth consequently, the company's share price now stands at a record high, and the dividend declared at the end of the most recent accounting period was 10% higher than the previous year's dividend. The Brinland government has recently set up a regulatory body to monitor the residential care homes industry. The regulatory body is considering introducing a variety of regulations to improve the customer experience in the industry. Following a period of consultation and investigation, the regulatory body is expected to announce a range of new regulations in the near future. The directors of ZZZ are concerned that the new regulations may adversely affect their company Which THREE of the following new regulations are likely to have the greatest negative impact on ZZTs performance?

An all-equity financed company currently generates total revenue of $50 million.Its current profit before interest and taxation (PBIT) is $10 million. Due to difficult trading conditions, the company expects its total revenue to be constantnext year, although some margins will reduce.It forecasts next year's PBIT will fall to 18% on 40% of its revenue, but that the PBIT onthe other 60% of its revenue will be unaffected.The rate of corporate tax is 20%.What is the forecast percentage reduction in next year's Earnings?

A company is reporting under IFRS 7 Financial Instruments: Disclosures for the first timeand the directors are concerned about whether this will lead to the disclosure of informationthat could affect the company's share price.The company is based in a country that uses the A$ but 40% of revenue relates to exportsales to the USA and priced in US$.When the company reports under IFRS 7 for the first time, the share price is most likely to:

NNN is a company financed by both equity and debt. The directors of NNN wish to calculate a valuation of the company's equity and at a recent board meeting discussed various methods of business valuation. Which THREE of the following are appropriate methods for the directors of NNN to use in this instance?

A company wishes to raise new finance using a rights issue to invest in a new project offering an IRR of 10% The following data applies: • There are currently 1 million shares in issue at a current market value of $4 each. • The terms of the rights issue will be $3.50 for 1 new share for 5 existing shares. • The company's WACC is currently 8%. What is the yield-adjusted theoretical ex-rights price (TERP)? Give your answer to 2 decimal places. $ ?

An unlisted company: Is owned by the original founder and member of their families. Is growing more rapidly than other companies in the same industry. Pays a fixed annual divided Which of the following methods would be the most appropriate to value this company’s equity? 

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 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?

Company C is a listed company. It is currently considering the acquisition of Company D. The original founder of Company C currently owns 52% of the shares. Alternative forms of consideration for Company D being considered are as follows: • Cash payment, financed by new borrowing • issue of new shares in Company C Which of the following is an advantage of a cash offer over a share-for exchange from the viewpoint of the original founder of Company C?

Which THREE of the following statements are correct in respect of the issuance of debt securities.

Delta and Kappa both wish to borrow $50m.Delta can borrow at a fixed rate of 12% or at a floating rate of the risk-free rate +3%Kappa can borrow at 15% fixed or the risk-free rate +4%.Delta wishes a variable rate loan and Kappa a fixed rate loan The bank for the twocompanies suggests a swap arrangement The two companies agree to a swaparrangement, sharing savings equallyWhat is the effective swap rate for each company?

A company is valuing its equity prior to an initial public offering (IPO).Relevant data: • Earnings per share $1.00 • WACC is 8% and the cost of equity is 12% • Dividend payout ratio 40% • Dividend growth rate 2% in perpetuityThe current share price using the Dividend Valuation Model is closest to: 

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?