CIMAPRA19-F03-1 PDF Dumps 2024 Exam Questions with Practice Test
Dumps for Free CIMAPRA19-F03-1 Practice Exam Questions
CIMA CIMAPRA19-F03-1 exam is an essential certification for finance professionals who want to demonstrate their expertise in financial strategy and management. CIMAPRA19-F03-1 exam covers a broad range of topics and requires a thorough understanding of financial concepts and their application in real-world scenarios. Candidates will need to demonstrate their ability to formulate and implement financial strategies, evaluate financial performance, and communicate financial information effectively. CIMAPRA19-F03-1 exam is challenging but rewarding, and passing it demonstrates a high level of knowledge and skill in financial strategy and management.
NEW QUESTION # 105
A company is reporting under IFRS 7 Financial Instruments: Disclosures for the first time and the directors are concerned about whether this will lead to the disclosure of information that could affect the company's share price.
The company is based in a country that uses the A$ but 40% of revenue relates to export sales to the USA and priced in US$.
When the company reports under IFRS 7 for the first time, the share price is most likely to:
- A. Stay the same since US$ risk can already be quantified from segmental analysis disclosures included elsewhere in the annual report.
- B. Either increase or decrease depending on market reaction to new information on how financial risk is managed.
- C. Decrease since investors place a lower value on higher risk businesses.
- D. Increase due to greater clarity of information available on the extent of US$ risks and how they are managed.
Answer: B
NEW QUESTION # 106
Company AAB is located in Country A with the A$ as its functional currency It plans to grow by acquisition and has identified Company BBA as a potential takeover candidate Company BBA is located in Country B with the BS as its functional currency.
The directors of Company AAB are concerned about foreign currency risk if the acquisition goes ahead Which of the following will be most effective in reducing Company AAB's exposure to translation risk if the acquisition is successful1?
- A. Financing the acquisition with equity in A$'s.
- B. Setting up a mufti-currency bank account to net-off receipts and payments
- C. Using forward contracts to fix the exchange rate between the AS and the B$
- D. Financing the acquisition with borrowings in BS's
Answer: C
NEW QUESTION # 107
A company wishes to raise additional debt finance and is assessing the impact this will have on key ratios.
The following data currently applies:
* Profit before interest and tax for the current year is $500,000
* Long term debt of $300,000 at a fixed interest rate of 5%
* 250,000 shares in issue with a share price of $8
The company plans to borrow an additional $200,000 on the first day of the year to invest in new project which will improve annual profit before interest and tax by $24,000.
The additional debt would carry an interest rate of 3%.
Assume the number of shares in issue remain constant but the share price will increase to $8.50 after the investment.
The rate of corporate income tax is 30%.
After the investment, which of the following statements is correct?
- A. Interest cover will rise; P/E ratio will fall.
- B. Interest cover will fall; P/E ratio will rise.
- C. Interest cover will rise; P/E ratio will rise.
- D. Interest cover will fall; P/E ratio will fall.
Answer: B
NEW QUESTION # 108
Company AAB is located in country A whose currency is the AS It has a subsidiary, BBA, located m country B that has the BS as its currency AAB has asked BBA to pay BS40 million surplus funds to AAB to assist with a planned new capital investment in country A The exchange rate today is AS1 = BS3 Tax regimes
* Company BBA pays withholding tax of 25% on all cash remitted to the parent company
* Company AAB pays tax of 10% on at cash received from its subsidiary
How much will company AAB have available for investment after receiving the surplus funds from BBA?
- A. A$ 12 million
- B. A$ 81 million
- C. A$ 27 million
- D. A$ 9 million
Answer: D
NEW QUESTION # 109
The ex div share price of Company A's shares is $.3.50
An investor in Company A currently holds 2,000 shares.
Company A plans to issue a script divided of 1 new shares for every 10 shares currently held.
After the scrip divided, what will be the total wealth of the shareholder?
Give your answer to the nearest whole $.
Answer:
Explanation:
7000
NEW QUESTION # 110
A company is wholly equity funded. It has the following relevant data:
* Dividend just paid $4 million
* Dividend growth rate is constant at 5%
* The risk free rate is 4%
* The market premium is 7%
* The company's equity beta factor is 1.2
Calculate the value of the company using the Dividend Growth Model.
Give your answer in $ million to 2 decimal places.
Answer:
Explanation:
$ ? million
56.76, 56.75
NEW QUESTION # 111
A company is considering either directly exporting its product to customers in a foreign country or setting up a subsidiary in the foreign country to manufacture and supply customers in that country.
Details of each alternative method of supplying the foreign market are as follows:
There is an import tax on product entering the foreign country of 10% of sales value.
This import duty is a tax-allowable deduction in the company's domestic country.
The exchange rate is A$1.00 = B$1.10
Which alternative yields the highest total profit after taxation?
- A. Domestic: A$33,750
- B. Foreign subsidiary: A$38,500
- C. Foreign subsidiary: A$35,000
- D. Domestic: A$41,250
Answer: C
NEW QUESTION # 112
PYP is a listed courier company. It is looking to raise new finance to fit each of its delivery vans with new equipment to allow improved parcel tracking for customers The senior management team of PYP have decided on a 10-year secured bond to finance this investment-
Which TWO of the following variables are most likely to decrease the yield to maturity of the bond?
- A. The senior management team decide to issue a convertible bond rather than a conventional bond
- B. The senior management team decide to issue an unsecured bond rather than a secured bond
- C. The announcement of a new contract for PYP that will increase operating profits by 5% over the next 5 years.
- D. Changing the term of the bond from 1 0 years to 5 years to match the expected life of the new equipment
Answer: A,D
NEW QUESTION # 113
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.
$ ? million
- A. 7.5, 7.50
- B. 7.5, 6.50
Answer: A
NEW QUESTION # 114
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. Liquidity problems are less likely to be experienced if there is a downturn in business.
- B. The excess cash is earning a negligible return.
- C. The company will be in a position to respond promptly to unexpected investment opportunities.
- D. Retaining excess cash may make the company vulnerable to hostile takeover.
- E. The market may interpret the return of excess cash as a sign of weak growth prospects.
Answer: A,C,E
NEW QUESTION # 115
Company C invests heavily in Research and Development an need to raise $45 million to finance future projects. It has decided to use equity finance raised by a tender offer, The following tender offers have been received from potential investors:
Company C wishes to select an offer price that will project shareholders from a significant dilution of control but still raise the required amount of finance.
What offer price should Company C's select?
- A. $4.50
- B. $4.00
- C. $4.25
- D. $4.75
Answer: A
NEW QUESTION # 116
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. 13.43%
- B. 12.67%
- C. 11.66%
- D. 11.09%
Answer: D
NEW QUESTION # 117
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. Refer the bid to the country's competition authorities.
- B. Pay a one-off special dividend.
- C. Write to shareholders explaining fully why the company's share price is under valued.
- D. Change the Articles of Association to increase the percentage of shareholder votes required to approve a takeover.
Answer: C
NEW QUESTION # 118
Which of the following statements about companies seeking a stock market listing is correct?
- A. The enhanced reputation of the company can improve its credit rating reducing the risk of non-payment to suppliers and lenders.
- B. A listing may make it harder for a company to raise money from its existing lenders.
- C. A listing will require the owners to either sell a majority of their shares, or, if they retain their shares, to step down from the board.
- D. When a company seeks a listing this may unsettle its staff, potentially resulting in a loss of valued employees.
Answer: A
NEW QUESTION # 119
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. 11.0%
- C. 8.0%
- D. 9.4%
Answer: B
NEW QUESTION # 120
AA is considering changing its capital structure. The following information is currently relevant to AA:
The gearing rating raising the new debt finance will be 50%.
Which THREE of the following statement about the impact of AA's change in capital structure are true under Modigliani and Miler's capital structure theory with tax.
- A. The cost of equity will decrease below 10%
- B. The cost of debt remain unchanged at 4%
- C. The WACC increase above 7.6
- D. The WACC will decrease below 7.6%
- E. The cost of debt will increase above 4%
- F. The cost of equity will increase above 10%
Answer: B,C,D
NEW QUESTION # 121
Hospital X provides free healthcare to all members of the community, funded by the central Government.
Hospital Y provides healthcare which has to be paid for by the individual patients. It is a listed company, owned by a large number of shareholders.
In comparing the above two organisations and their objectives, which THREE of the following statements are correct?
- A. X and Y will have the same primary non financial objective - provision of quality of health care.
- B. X and Y have the same primary financial objective - to maximise shareholder wealth.
- C. X is a not-for-profit organisation while Y is a for-profit organisation.
- D. The performance of X will be appraised primarily on the basis of value for money.
- E. Only Y is likely to have a mixture of financial and non-financial objectives.
Answer: A
NEW QUESTION # 122
A UK company enters into a 5 year borrowing with bank P at a floating rate of GBP Libor plus 3%
It simultaneously enters into an interest rate swap with bank Q at 4.5% fixed against GBP Libor plus 1.5%
What is the hedged borrowing rate, taking the borrowing and swap into account?
Give your answer to 1 decimal place.
- A. 6.5%
- B. 7.5%
Answer: B
NEW QUESTION # 123
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. Refer the bid to the country's competition authorities.
- B. Pay a one-off special dividend.
- C. Write to shareholders explaining fully why the company's share price is under valued.
- D. Change the Articles of Association to increase the percentage of shareholder votes required to approve a takeover.
Answer: C
NEW QUESTION # 124
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CIMA CIMAPRA19-F03-1 is a highly esteemed financial certification offered by the Chartered Institute of Management Accountants (CIMA). F3 Financial Strategy certification is globally recognized and is highly valued in the financial industry. CIMAPRA19-F03-1 exam is designed to test the candidate's ability to analyze, evaluate and implement financial strategies in various business scenarios.
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