[Jul-2023] Dumps Brief Outline Of The F3 Exam - TestSimulate
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CIMA F3 Certification Exam, also known as the F3 Financial Strategy exam, is an assessment of an individual's understanding of financial management and strategy. F3 exam is designed to test a candidate's knowledge of the principles of financial management and the application of these principles in a strategic context. F3 exam is part of the CIMA Professional Qualification, which is recognized globally as a leading qualification in the field of management accounting.
The CIMA F3 exam consists of three main areas of study: financial analysis, financial management, and financial risk management. The financial analysis section focuses on the interpretation of financial statements, ratios, and performance measures. The financial management section covers topics such as capital budgeting, financing, and working capital management. The financial risk management section covers risk identification, assessment, and response.
NEW QUESTION # 80
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.
Answer:
Explanation:
$ ?
4.06, 4.060
NEW QUESTION # 81
A company plans to cut its dividend but is concerned that the share price will fall.
This demonstrates the _____________ effect
Answer:
Explanation:
clientele
NEW QUESTION # 82
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.
Answer:
Explanation:
$ ?
740
NEW QUESTION # 83
Company AB was established 6 years ago by two individuals who each own 50% of the shares.
Each individual heads a separate division within the company, which now has annual turnover of GBP10 million and employs 40 people.
Some of the employees are very highly paid as they are important contributors to the company's profitability.
The owners of the company wish to realise the full value of their investment within the next 12 months.
Which TWO of the following options are most likely to be acceptable exit strategies to the two owners of the company?
- A. Spin off (or de-merger)
- B. Initial Public Offering (IPO)
- C. Sale to a larger competitor
- D. Management Buyout
- E. Sale to a Private Equity Investor on an earn-out basis
Answer: C,D
NEW QUESTION # 84
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 N
- B. Company L
- C. Company M
- D. Company O
Answer: B
NEW QUESTION # 85
Extracts from a company's profit forecast for the next financial year as follows:
Since preparing the forecast, the company has decided to return surplus cash to shareholders by a share repurchase arrangement.
The share repurchase would result in the company purchasing 20% of the 1,250 million ordinary shares currently in issue and canceling them.
Assuming the share repurchase went ahead, the impact on the company's forecast earnings per share will be an increase of:
- A. $0.200
- B. $0.175
- C. $0.100
- D. $0.125
Answer: C
NEW QUESTION # 86
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
Answer:
Explanation:
7.5, 7.50
NEW QUESTION # 87
A listed company is planning a share repurchase.
The following data applies:
* There are 10 million shares in issue
* The share repurchase will involve buying back 20% of the shares at a price of $0.75
* The company is holding $2 million cash
* Earnings for the current year ended are $2 million
The Directors are concerned about the impact that this repurchase programme will have on the company's cash balance and current year earnings per share (EPS) ratio.
Advise the directors which of the following statements is correct?
- A. The cash balance will decrease by 75% and EPS will decrease by 25%.
- B. The cash balance will decrease by 75% and EPS will increase by 25%.
- C. The cash balance will decrease by 20% and the EPS will decrease by 25%.
- D. The cash balance will decrease by 20% and the EPS will increase by 25%.
Answer: B
NEW QUESTION # 88
A company generates and distributes electricity and gas to households and businesses.
Forecast results for the next financial year are as follows:
The Industry Regulator has announced a new price cap of $2.00 per Kilowatt.
The company expects this to cause consumption to rise by 15% but costs would remained unaltered.
The price cap is expected to cause the company's net profit to fall to:
- A. $8.75 million profit
- B. $43.00 million profit
- C. $126.50 million loss
- D. $164.00 million profit
Answer: D
NEW QUESTION # 89
The primary objective of a public sector entity is to ensure value for money is generated.
Value for money is defined as performing an activity so as to simultaneously achieve economy, efficiency and effectiveness
Efficiency is defined as:
- A. performing activities in the least amount of time possible
- B. obtaining maximum output from minimum inputs
- C. obtaining quality inputs at minimum cost.
- D. spending funds so as to achieve the objectives of the entity.
Answer: A
NEW QUESTION # 90
The directors of the following four entities have been discussing dividend policy:
Which of these four entities is most likely to have a residual dividend policy?
- A. D
- B. A
- C. C
- D. B
Answer: D
NEW QUESTION # 91
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. 9.4%
- B. 11.0%
- C. 10.0%
- D. 8.0%
Answer: B
NEW QUESTION # 92
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.
Answer:
Explanation:
$ million.
34, 35, 34000000, 35000000
NEW QUESTION # 93
A company has borrowings of S5 million on which it pays interest at 8%. It has an operating profit margin of
20%.
The company plans to increase borrowings by S2 million Interest on additional borrowings would be 10% and the operating profit margin would remain unchanged A debt covenant attached to the new borrowings requires interest cover to be at least 4 times throughout the period of the borrowing Interest cover is defined in the loan documentation as being based on operating profit What is the minimum sales value required each year to avoid a breach of the interest cover covenant'
- A. TS2.40 million
- B. S12.00 million
- C. S2.88 million
- D. S3.00 million
Answer: A
NEW QUESTION # 94
Which THREE of the following are considered in detail in IFRS 7 Financial Instruments: Disclosures?
- A. Market risk
- B. Liquidity risk
- C. Credit risk
- D. Business risk
- E. Enterprise risk
Answer: A,B,C
NEW QUESTION # 95
A 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.
- A. 1 new share for every 20 existing shares
- B. 1 new share for every 5 existing shares
- C. 1 new share for every 25 existing shares
- D. 1 new share for every 4 existing shares
Answer: D
Explanation:
Explanation
Calc_Set2
NEW QUESTION # 96
A company has:
* $6 million market value of equity
* $4 million market value of debt
* WACC of 11.04%
* Corporate income tax rate of 20%
According to Modigliani and Miller's theory of capital structure with tax, what is the ungeared cost of equity?
- A. 16.24%
- B. 10.16%
- C. 12.00%
- D. 12.54%
Answer: C
NEW QUESTION # 97
The directors of the following four entities have been discussing dividend policy:
Which of these four entities is most likely to have a residual dividend policy?
- A. D
- B. A
- C. C
- D. B
Answer: D
NEW QUESTION # 98
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. 12.67%
- B. 11.66%
- C. 13.43%
- D. 11.09%
Answer: D
NEW QUESTION # 99
A company plans to raise $12 million to finance an expansion project using a rights issue.
Relevant data:
* Shares will be offered at a 20% discount to the present market price of $15.00 per share.
* There are currently 2 million shares in issue.
* The project is forecast to yield a positive NPV of $6 million.
What is the yield-adjusted Theoretical Ex-Rights Price following the announcement of the rights issue?
- A. $16.00
- B. $11.00
- C. $9.00
- D. $14.00
Answer: A
NEW QUESTION # 100
An aerospace company is planning to diversify into car manufacturing.
Relevant data:
What is the the cost of equity to be used in the WACC for the project appraisal?
Give your answer in percentage, as a whole number.
Answer:
Explanation:
19%
NEW QUESTION # 101
Company W is a manufacturing company with three divisions, all of which are making profits:
* Division A which manufactures cars
* Division B which manufactures trucks
* Division C which manufactures agricultural machinery
Company W is facing severe competitive pressure in all of its markets, and is currently operating with a high level of gearing Company W's latest forecasts suggest that it needs to raise cash to avoid breaching loan covenants on its existing debt finance in 6 months' time In a recent strategy review. Divisions A and B were identified as being the core divisions of Company W The management of Division C is known to be interested in the possibility of a management buy-out.
Company Z is known to be interested in making a takeover bid for Company W's truck manufacturing division A rival to Company W has recently successfully demerged its business, this was well received by the Financial markets Which of the following exit strategies will be most suitable for company W?
- A. Closure of Division
- B. Management buy-out of Division C
- C. Demerger of Division C
- D. Sale of Division B to Company Z
Answer: B
NEW QUESTION # 102
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 # 103
Which TWO of the following situations offer arbitrage opportunities?
A)
B)
C)
D)
- A. Option C
- B. Option A
- C. Option D
- D. Option B
Answer: D
NEW QUESTION # 104
A company has a cash surplus which it wishes to distribute to shareholders by a share repurchase rather than paying a special dividend.
Which THREE of the following statements are correct?
- A. The payment of a special dividend could raise shareholders' expectations of similar distributions in the future, unlike a share repurchase.
- B. The share repurchase could send a negative signal to shareholders as it could be interpreted as a failure of management to find suitable investment opportunities.
- C. The share repurchase, if approved by the shareholders, will be binding on all of the company's shareholders.
- D. Different tax regimes could result in shareholders having a preference for a share repurchase due to the often more preferential tax treatment of capital gains.
- E. Determination of the repurchase price will be easy as shareholders will insist on receiving the open market price.
Answer: A,B,D
NEW QUESTION # 105
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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 F3 exam demonstrates the candidate's commitment to professional development and provides opportunities for career advancement and higher earning potential.
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