This page was exported from Free Exam Dumps Collection [ http://free.examcollectionpass.com ] Export date:Wed Feb 5 20:29:05 2025 / +0000 GMT ___________________________________________________ Title: 100% Pass Top-selling F3 Exams - New 2023 CIMA Pratice Exam [Q116-Q137] --------------------------------------------------- 100% Pass Top-selling F3 Exams - New 2023 CIMA Pratice Exam CIMA Strategic level Dumps F3 Exam for Full Questions - Exam Study Guide CIMA CIMAPRA19-F03-1 (F3 Financial Strategy) Certification Exam is an essential certification exam for individuals seeking to advance their careers in finance. F3 exam is designed to test the knowledge and skills of finance professionals in areas such as financial strategy, investment decisions, risk management, and financial instruments. F3 Financial Strategy certification is globally recognized, making it a valuable asset for finance professionals seeking to work in various parts of the world. CIMA CIMAPRA19-F03-1 (F3 Financial Strategy) Certification Exam is an excellent opportunity for finance professionals to enhance their skills and knowledge in financial management. It is a globally recognized certification that can open up many career opportunities in finance and accounting. F3 Financial Strategy certification exam is designed to assess the candidate's ability to develop and implement financial strategies in an organization, which is a critical skill for any finance professional.   QUESTION 116A company needs to raise $20 million to finance a project.It has decided on a rights issue at a discount of 20% to its current market share price.There are currently 20 million shares in issue with a nominal value of $1 and a market price of $5 per share.Calculate the terms of the rights issue.  1 new share for every 4 existing shares  1 new share for every 20 existing shares  1 new share for every 5 existing shares  1 new share for every 25 existing shares Calc_Set2QUESTION 117At 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?  Interest cover would reduce to 3 times and the covenant would be breached.  Interest cover would reduce to 3 times and the covenant would NOT be breached.  Interest cover would reduce to 5 times and the covenant would be breached.  Interest cover would reduce to 5 times and the covenant would NOT be breached. QUESTION 118CI IJ has decided to move its production plant to overseas country X.This would make the product cheaper to produce.The technology used to make the product is very advanced and some of the skilled staff would have to move to country X.The Production Director has identified that there are some political risks in moving to county X.For each of the political risks of moving to country X shown below, select the correct method for reducing the risk. QUESTION 119The Board of Directors of a listed company have decided that it needs to increase its equity capital to ensure it is in a more stable financial position.The shareholder profile is a mix of institutional and individual small shareholders.The board is considering either:* A scrip dividend* A zero dividendWhich THREE of the following would be considered disadvantages of a scrip dividend compared to a zero dividend?  A scrip dividend results in distributable reserves being moved to non-distributable reserves.  A scrip dividend will dilute the control of current shareholders.  A scrip dividend results in more shares in issue which will create an expectation for future dividends.  There will be company secretarial and additional administration involved with a scrip dividend.  A scrip issue may give shareholders the impression that they are receiving something of value. QUESTION 120Company 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 reruns1. 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 companyThe directors of Company A are therefore keen to prevent the bid from going aheadWhich THREE of the following defence strategies could be used by the directors of Company Air this situation?  Offer the company to an alternative While Knight bidder.  Appeal to their own shareholders that the company should not be broken up because i: has strong growth prospects.  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  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.  Give existing shareholders the right to buy bonds in the future. QUESTION 121A 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 $3.50 for 1 new share for 5 existing shares.* The company’s WACC is currently 8%.What is the yield-adjusted theoretical ex-rights price (TERP)?Give your answer to 2 decimal places.$ ? 4.06, 4.060QUESTION 122TU has relatively few tangible assets and is dependent for profits and growth on the high-value individuals it employs. Which of the following statements best explains why the net asset valuator method’s considered unstable for TU?  TU does not account for its tangible assets  TU does not account for its intangible assets.  TU accounts for its intangible assets at net realisable value.  TU accounts for its intangible assets at historical value. QUESTION 123A 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 earnedWhat is the NPV of the buy option?Give your answer to the nearest $000.$ ? 740QUESTION 124Under traditional theory, an increase in a company’s WACC would cause the value of the company to:  Increase  Decrease  Stay the same  Either increase or decrease QUESTION 125A company is financed by debt and equity and pays corporate income tax at 20%.Its main objective is the maximisation of shareholder wealth.It needs to raise $200 million to undertake a project with a positive NPV of $10 million.The company is considering three options:* A rights issue.* A bond issue.* A combination of both at the current debt to equity ratio.Estimations of the market values of debt and equity both before and after the adoption of the project have been calculated, based upon Modigliani and Miller’s capital theory with tax, and are shown below:Under Modigliani and Miller’s capital theory with tax, what is the increase in shareholder wealth?  $210 million if financed by equity  $50 million if financed by debt  $160 million if financed by a mixture of debt and equity  $10 million irrespective of finance QUESTION 126Two companies that operate in the same industry have different Price/Earnings (P/E) ratios as follows:Which of the following is the most likely of the different P/E ratios?  Company B has a greater profit this year than Company A.  Company B has higher business risk than Company A.  Company B has higher expected future growth than Company A.  Company B has higher gearing than Company A. QUESTION 127M is an accountant who wishes to take out a forward rate agreement as a hedging instrument but the company treasurer has advised that a short-term interest rate future would be a better option.Which of the following is true of a short-term interest rate  It can be tailored to the exact reeds of the company.  It interest rates have gone down the price of the future will have fallen.  It must be kept for ne whole duration of the contract  The date is flexible and the position can be closed quickly and easily. QUESTION 128Providers of debt finance often insist on covenants being entered into when providing debt finance for companies.Agreement and adherence to the specific covenants is often a condition of the loan provided by the lender.Which THREE of the following statements are true in respect of covenants?  Covenants are entered into to penalise the company.  Covenants are entered into to give the lender added protection on the loan extended to the company.  Covenants are entered into to impose financial discipline on the company.  Covenants enable the lender to demand immediate repayment or to renegotiate terms if it is breached.  Covenants are entered into to eliminate the tax liability of the company. ExplanationDiscursive_F0QUESTION 129KKL is a listed sports clothing company with three separate business units. KKL is seeking to sell TT’, one of these business unitsTTP cwns a new. brand of trail running shoes that have Droved hugely popular with lone distance runners. The management team of TTP are frustrated by the constraints imposes b/ KKL in managing tie brand and developing. the bus ness and they believe that TTF has huge growth potential.The management team of TTP have approached KKL with a proposal to purchase 1~P through a management layout (MDO). KKL has accepted this proposal as TTP has not proved to be a good fit’ with the rest of the business and has agreed on the selling price.Which THREE of the following factors a-e mast Likely to affect the success of the MBO?  The motivation of the TTP management team to invest in future growth.  Searing sufficient. funding for the MBO.  The constraints imposed by KKL managing TTF’s brand.  The ability of the TTF management team to take over the head office functions successfully.  The ability the TTP management team to develop the brand and achieve the expected growth. QUESTION 130A listed company follows a policy of paying a constant dividend. The following information is available:* Issued share capital (nominal value $0.50) $60 million* Current market capitalisation $480 millionThe shareholders are requesting an increased dividend this year as earnings have been growing. However, the directors wish to retain as much cash as possible to fund new investments. They therefore plan to announce a1-for-10 scrip dividend to replace the usual cash dividend.Assuming no other influence on share price, what is the expected share price following the scrip dividend?Give your answer to 2 decimal places.$ ? 3.64, 3.63, 3.65QUESTION 131Company A plans to diversify by a cash acquisition of Company B an unlisted company in another country (Country B) which operates in a different industrial sector Company A already manufactures its product in Country B and has a loan denominated in Country B’s currency Company A regularly suffers foreign exchange losses due to volatility in the exchange rate between the two countries’ currencies in recent years.Which THREE of the following appear to be be valid justifications of this diversification decision?  The diversification will give Company A protection from political risk  The diversification into another product market will lower business risk  The diversification will give Company A greater protection from transaction risk.  The diversification will give Company A greater protection from translation risk  The diversification will enable Company A to enjoy production scale economies QUESTION 132A 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?  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.  Yes, because it will have lower interest rate risk and interest cost remains the same.  Yes, because interest cost will decrease with the interest rate swap in place.  No, because interest cost will increase with the interest rate swap in place. QUESTION 133ADC 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 QUESTION 134Company A has made an offer to acquire Company Z.Both companies are quoted and their current market share prices are:* Company A – $4* Company Z – $5Shareholders in company Z have been given three alternative offers:* Cash of $5.50 per share* Share for share exchange on the basis of 3 for 2* 10.5% long dated bond for every 20 sharesThe bond is has a nominal value of $100 and the expected yield on bonds of similar risk is 10%.You are advising a Company Z shareholder on the three offers.She requires a 15% premium if she is to accept the offer.In providing your advice, which of the following statements is correct?  The bond offer is only worth $100 which represents a zero premium and should be rejected.  The bond offer is above the minimum threshold and should be accepted.  The share for share exchange is the only offer which is above the acceptance threshold.  The value of the consideration given by the cash and bond offers is certain, unlike the share offer. QUESTION 135A company is currently all-equity financed with a cost of equity of 9%.It plans to raise debt with a pre-tax cost of 3% in order to buy back equity shares.After the buy-back, the debt-to-equity ratio at market values will be 1 to 2.The corporate income tax rate is 25%.Which of the following represents the company’s cost of equity after the buy-back according to Modigliani and Miller’s Theory of Capital Structure with taxes?  11.5%  18%  11.3%  90% QUESTION 136A company has some 7% coupon bonds in issue and wishes to change its interest rate profile.It has decided to do this by entering into a plain coupon interest rate swap with it’s bank.The bank has quoted a swap rate of: 6.0% – 6.5% fixed against LIBOR.What will the company’s new interest rate profile be?  VARIABLE at LIBOR  VARIABLE at LIBOR + 0.5%  VARIABLE at LIBOR + 1.0%  FIXED at 6.5% QUESTION 137The value of a call option will increase because of:  An increase in the strike price.  A decrease in the volatility of the share.  An increase in the time to expiry.  A decrease in the market value of the share  Loading … Authentic Best resources for F3 Online Practice Exam: https://www.examcollectionpass.com/CIMA/F3-practice-exam-dumps.html --------------------------------------------------- Images: https://free.examcollectionpass.com/wp-content/plugins/watu/loading.gif https://free.examcollectionpass.com/wp-content/plugins/watu/loading.gif --------------------------------------------------- --------------------------------------------------- Post date: 2023-09-14 13:28:46 Post date GMT: 2023-09-14 13:28:46 Post modified date: 2023-09-14 13:28:46 Post modified date GMT: 2023-09-14 13:28:46