2023 Correct and Up-to-date CIMA CIMAPRA19-F03-1 BrainDumps
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The CIMA F3 (Financial Strategy) certification exam is an essential exam for individuals who want to pursue a career in finance. This certification provides a comprehensive understanding of financial management, including financial strategy formulation and implementation. The CIMA F3 exam is designed to test the candidate's knowledge of financial strategy and how to apply it in real-world scenarios.
To be eligible to take the CIMA CIMAPRA19-F03-1 (F3 Financial Strategy) Exam, candidates must have completed the CIMA Operational and Management level exams. The exam is computer-based and consists of 90 multiple-choice questions that must be completed within three hours. The questions are designed to test candidates' knowledge and understanding of financial strategy, investment decision-making, risk management, and financial reporting.
NEW QUESTION # 25
For which THREE of the following risk categories does IFRS 7 require sensitivity analysis?
- A. Credit risk
- B. Interest rate risk
- C. Currency risk
- D. Supply chain risk
- E. Commodity risk
- F. Liquidity risk
Answer: B,C,E
NEW QUESTION # 26
Company A is unlisted and all-equity financed. It is trying to estimate its cost of equity.
The following information relates to another company, Company B, which operates in the same industry as Company A and has similar business risk:
Equity beta = 1.6
Debt:equity ratio 40:60
The rate of corporate income tax is 20%.
The expected premium on the market portfolio is 7% and the risk-free rate is 5%.
What is the estimated cost of equity for Company A?
Give your answer to one decimal place.
? %
- A. 12.3, 12.30
- B. 11.3, 12.30
Answer: A
NEW QUESTION # 27
Company X plans to acquire Company Y.
Pre-acquisition information:
Post-acquisition information:
Total combined earnings are expected to increase by 10%
Total combined P/E multiple will remain at 10 times
Which of the following share-for-share exchanges will result in an increase of 10% in Company X's share price post-acquisition?
- A. 3 shares in Company X for 5 shares in Company Y
- B. 1 share in Company X for 2 shares in Company Y
- C. 1 share in Company X for 2.75 shares in Company Y
- D. 2 shares in Company X for 1 shares in Company Y
Answer: A
NEW QUESTION # 28
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. Retaining excess cash may make the company vulnerable to hostile takeover.
- B. The excess cash is earning a negligible return.
- C. Liquidity problems are less likely to be experienced if there is a downturn in business.
- D. The market may interpret the return of excess cash as a sign of weak growth prospects.
- E. The company will be in a position to respond promptly to unexpected investment opportunities.
Answer: C,D,E
NEW QUESTION # 29
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?
- A. Do not hedge.
- B. Enter into a zero-cost collar with a floor of 2.9% and a ceiling of 4%.
- C. Enter into an interest rate swap at 3.1% fixed against 12-month risk-free rate.
- D. Enter into an interest rate cap at an annual premium of 0.533% and a cap of 3%,
Answer: A
NEW QUESTION # 30
The value of a call option will increase because of:
- A. A decrease in the market value of the share
- B. An increase in the time to expiry.
- C. An increase in the strike price.
- D. A decrease in the volatility of the share.
Answer: B
NEW QUESTION # 31
A company is planning a share repurchase programme with the following details:
* Repurchased shares will be immediately cancelled.
* The shares will be purchased at a premium to the market share price.
The current market share price is greater than the nominal value of the shares.
Which of the following statements about the impact of the share repurchase programme on the company's financial statements is correct?
- A. The share capital figure would reduce by the nominal value of the shares purchased.
- B. The premium to the market value would be charged to the Income Statement.
- C. The total value of the equity in its Statement of Financial Position would remain unchanged.
- D. The premium to the nominal value would be charged to retained earnings.
Answer: A
NEW QUESTION # 32
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.
$ ?
- A. 0
- B. 1
Answer: B
NEW QUESTION # 33
A company intends to sell one of its business units. Company W, by a management buyout (MBO). A selling price of S200 million has been agreed.
The managers are discussing with a bank and a venture capital company (VCC) the following financing proposal.
The VCC requires a minimum return on its equity investment In the MBO of 35% a year on a compound basis over 5 years What is the minimum total equity value of Company W in 5 years time in order to meet the VCC's required return? Give your answer to one decimal place.
Answer:
Explanation:
65
NEW QUESTION # 34
A company plans a four-year project which will be financed by either an operating lease or a bank loan.
Lease details:
* Four year lease contract.
* Annual lease rentals of $45,000, paid in advance on the 1st day of the year.
Other information:
* The interest rate payable on the bank borrowing is 10%.
* The capital cost of the project is $200,000 which would have to be paid at the beginning of the first year.
* A salvage or residual value of $100,000 is estimated at the end of the project's life.
* Purchased assets attract straight line tax depreciation allowances.
* Corporate income tax is 20% and is payable at the end of the year following the year to which it relates.
A lease-or-buy appraisal is shown below:
Which THREE of the following items are errors within the appraisal?
- A. The salvage value has been included within the lease option
- B. Using the 10% discount rate is incorrect
- C. Lease payments are timed incorrectly
- D. The project's operating cashflows should be included
- E. Tax relief on lease payments have not been lagged correctly
- F. The bank loan repayments should be included
Answer: A,B,E
NEW QUESTION # 35
Which TWO of the following statements about debt instruments are correct?
- A. A zero coupon will eliminate the tax shield effect on debt payments.
- B. Changes in corporation tax rates will have no effect on the tax shield of fixed rate debentures.
- C. The true cost of servicing debt instruments to the company is the post-tax cost of debt.
- D. If corporation tax rates rise, the tax shield effect on debenture interest will be reduced.
Answer: A,B
NEW QUESTION # 36
A venture capitalist invests in a company by means of buying:
* 9 million shares for $2 a share and
* 8% bonds with a nominal value of $2 million, repayable at par in 3 years' time.
The venture capitalist expects a return on the equity portion of the investment of at least 20% a year on a compound basis over the first 3 years of the investment.
The company has 10 million shares in issue.
What is the minimum total equity value for the company in 3 years' time required to satisify the venture capitalist's expected return?
Give your answer to the nearest $ million.
$ million.
- A. 34, 34, 34000000, 35000000
- B. 34, 35, 34000000, 35000000
Answer: B
NEW QUESTION # 37
TTT pic is a listed company. The following information is relevant:
TTT pic's board is considering issuing new 6% irredeemable debt to re-purchase equity. This is expected to change TTT pic's debt to equity mix to 40: 60 by market value. The corporate tax rate is 20%.
What will be TTT pic's WACC following this change in capital structure?
- A. 11.09%
- B. 12.67%
- C. 13.43%
- D. 11.66%
Answer: A
NEW QUESTION # 38
A company is based in Country Y whose functional currency is YS. It has an investment in Country Z whose functional currency is ZS This year the company expects to generate ZS20 million profit after tax.
Tax Regime
* Corporate income tax rate in Country Y is 60%
* Corporate income tax rate in Country Z Is 30%
* Full double tax relief is available
Assume an exchange rate of YS1 = ZS5
What is the expected profit after tax in YS if the ZS profit is remitted to Country Y?
- A. YS57.14 million
- B. YS6.67 million
- C. YS2 29 million
- D. YS1 60 million
Answer: C
NEW QUESTION # 39
A company plans to cut its dividend but is concerned that the share price will fall. This demonstrates the _____________ effect
- A. B
- B. A
Answer: B
NEW QUESTION # 40
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The CIMA F3 certification exam is a highly regarded professional certification for finance professionals who are looking to advance their careers in financial management. It covers a broad range of topics that are essential for making strategic financial decisions, and it is recognized globally by employers in the finance industry. Passing this exam demonstrates the candidate's commitment to professional development and provides opportunities for career advancement and higher earning potential.
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