[Nov 29, 2021] F3 Test Engine files, F3 Dumps PDF
Latest CIMA F3 PDF and Dumps (2021) Free Exam Questions Answers
NEW QUESTION 121
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. Write to shareholders explaining fully why the company's share price is under valued.
- B. Pay a one-off special dividend.
- C. Refer the bid to the country's competition authorities.
- D. Change the Articles of Association to increase the percentage of shareholder votes required to approve a takeover.
Answer: A
NEW QUESTION 122
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.
Answer:
Explanation:
34, 35,
34000000, 35000000
NEW QUESTION 123
Which THREE of the following are considered in detail in IFRS 7 Financial Instruments: Disclosures?
- A. Market risk
- B. Enterprise risk
- C. Liquidity risk
- D. Business risk
- E. Credit risk
Answer: A,C,E
NEW QUESTION 124
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. $14.00
- B. $9.00
- C. $16.00
- D. $11.00
Answer: C
Explanation:
Calc_Set3
NEW QUESTION 125
Company T has 1,000 million shares in issue with a current share price of $10 each.
Company V has 300 million shares in issue with a current share price of $5 each.
Company T is considering acquiring Company V.
Total synergy gains of $100 million have been estimated.
The purchase of Company V's shares would be by cash at a 10% premium above the current share price.
In seeking approval for the acquisition, the likely reaction from T's shareholders will be:
- A. accepted as there is $100 million of synergy which will all go to T's shareholders.
- B. rejected as T's shareholders will not be willing to pay more than $1,500 million for V.
- C. rejected as T's shareholders will see a decrease in their wealth overall of $50 million.
- D. accepted as there will be an increase in the value of the business of $1,500 million.
Answer: C
NEW QUESTION 126
A company raised fixed rate bank finance together with an interest rate swap for the same term and same principal value to pay floating receive fixed rate interest on an annual basis.
Which THREE of the following statements are correct?
- A. LIBID (London Interbank Bid Rate) is normally used as the reference rate for determining interest due under the swap.
- B. On the first day of this arrangement, the company receives the principal borrowed from the bank and pays this across to the swap counterparty.
- C. Under the swap, interest is exchanged every year.
- D. The company has effectively obtained floating rate debt.
- E. The swap contract is normally a contract between a company and a bank.
Answer: C,D,E
NEW QUESTION 127
Company M plans to bid for Company J.
Company M has 20 million shares in issue and a current share price of $10.00 before publicly announcing the planned takeover. Company J has 10 million shares in issue and a current share price of $4.00.
The directors of Company M are considering an all-share bid of 1 Company M shares for 2 Company J shares.
Synergies worth $20m are expected from the acquisition.
What is the likely change in wealth for Company M's shareholders (in total) if the bid is accepted?
Give your answer to the nearest $ million.
Answer:
Explanation:
$ ? million
8
NEW QUESTION 128
Company Y plans to diversify into an activity where Company X has an equity beta of 1.6, a debt beta of zero and gearing of 50% (debt/debt plus equity).
The risk-free rate of return is 5% and the market portfolio is expected to return 10%.
The rate of corporate income tax is 30%.
What would be the risk-adjusted cost of equity if Company Y has 60% equity and 40% debt?
- A. 13%
- B. 9.1%
- C. 11.6%
- D. 11.9%
Answer: D
NEW QUESTION 129
Select the category of risk for each of the descriptions below:
Answer:
Explanation:
NEW QUESTION 130
Company A is proposing a rights issue to finance a new investment. Its current debt to equity ratio is 10%.
Which TWO of the following statements are true?
- A. Company A's current low gearing ratio may require a rights issue rather than a debt issue to finance the new project.
- B. The actual ex-rights price may be higher than the theoretical ex-rights price due to the value created from the project.
- C. The issue price of new shares should be set to guarantee the full take up of shares offered.
- D. According to Modigliani and Miller's Theory of Capital Structure with tax, the rights issue will result in a lower cost of equity for Company A.
- E. The issue price has to be at least 20% below the pre-rights share price.
Answer: B,D
NEW QUESTION 131
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. 12.54%
- B. 10.16%
- C. 12.00%
- D. 16.24%
Answer: C
NEW QUESTION 132
A company's latest accounts show profit after tax of $20.0 million, after deducting interest of $5.0 million. The company expects earnings to grow at 5% per annum indefinitely.
The company has estimated its cost of equity at 12%, which is included in the company WACC of 10%.
Assuming that profit after tax is equivalent to cash flows, what is the value of the equity capital?
Give your answer to the nearest $ million.
$ ? million
Answer:
Explanation:
300,
300000000
NEW QUESTION 133
Two companies that operate in the same industry have different Price/Earnings (P/E) ratios as follows:
Which of the following is the most likely explanation of the different P/E ratios?
- A. Company B has higher gearing than Company A.
- B. Company B has higher business risk than Company A.
- C. Company B has a greater profit this year than Company A.
- D. Company B has higher expected future growth than Company A.
Answer: D
NEW QUESTION 134
B has a S3 million loan outstanding on which the interested rate is reset every 6 months for the following 6 month and the interested is payable at the end of that 6 month period. The next 6 monthly reset period starts in
3 months and the treasurer of B thinks interested rates are likely to raise between and then.
Current 6-month rates are 6.4% and the treasurer can get a rate of 6.9% for a 6-month forward rate agreement (FRA) starting in 3 months time. By transacting an TRA the treasurer can lock in a rate today of 6.9%.
If interested rates are 7.5% in 3 months' time, what will the net amount payable be?
Give your answer to the nearest thousand dollars.
Answer:
Explanation:
104
NEW QUESTION 135
A company proposes to value itself based on the net present value of estimated future cash flows.
Relevant data:
* The cash flow for the next three years is expected to be £100 million each year
* The cash flow after year 3 will grow at 2% to perpetuity
* The cost of capital is 12%
The value of the company to the nearest $ million is:
- A. $834 million
- B. $1,260 million
- C. $889 million
- D. $966 million
Answer: D
NEW QUESTION 136
A company aims to increase profit before interest and tax (PBIT) each year.
The company reports in A$ but has significant export sales priced in B$.
All other transactions are priced in A$.
In 20X1, the company reported:
In 20X2, the only changes expected are:
* An increase in export prices of 10%, but no change to units sold.
* A rise in the value of the B$ to A$/B$ 2.500 (that is, A$ 1 = B$ 2.5) Is it likely that the company would still meet its objective to grow PBIT between 20X1 and 20X2?
- A. No, PBIT would fall by A$ 150 million.
- B. Yes, PBIT would increase by A$ 48 million.
- C. Yes, PBIT would increase by A$ 150 million.
- D. No, PBIT would fall by A$ 48 million.
Answer: D
NEW QUESTION 137
Company A is a large well-established listed entertainment company and Company B is a small unlisted company specializing in providing online media streaming.
Company A has a gearing ratio of 60% (using book values) and interest cover of 2.
Company A is considering making an offer for Company B, either a cash offer financial by raising additional debt finance or a share-for-share exchange.
Which of the following is most likely to occur if Company A offers a share-for exchange rather than offering cash finance by raising debt?
- A. Divided per share would be higher.
- B. Eamings per share would be higher.
- C. There would be no dilution f of control.
- D. Geaning would be lower.
Answer: D
NEW QUESTION 138
Which TIIRCC of the following are most likely to reduce the long term credit rating co a company?
- A. The issue of new shares where the funds raised are invested in expanding into a new nigh risk market.
- B. The issue of a new bond where the funds raised are invested in a project that has an NPV of nil.
- C. Loss of a major customer that contributed 30% of sales revenue.
- D. The issue of new shares where the funds raised are invested in a project that has an NPV of nil.
- E. Disposal of a loss-making division where the funds raised will be used to pay a special dividend to shareholders.
Answer: B,C,E
NEW QUESTION 139
Company F's current profit before interest and taxation is $5.0 million.
It has a 10% long-term corporate bond in issue with a nominal value of $10 million.
Corporate tax is paid at 25%.
The industry average P/E multiple is 10.
Company X has made an approach to acquire the entire share capital of Company F for $30 million.
Company X has announced that anticipated synergies (after interest and taxation) arising from its acquisition of Company F will be $1 million each year in perpetuity.
Advise the Board of Directors of Company F if the bid should be accepted, based on the above information?
- A. Reject the bid because Company F is potentially worth $40 million to Company X.
- B. Reject the bid because Company F is potentially worth $50 million to Company X.
- C. Reject the bid because Company F is potentially worth $60 million to Company X.
- D. Accept the bid because Company F is potentially worth $30 million to Company X.
Answer: A
NEW QUESTION 140
......
Pass Your CIMA Strategic level F3 Exam on Nov 29, 2021 with 255 Questions: https://www.lead2passexam.com/CIMA/valid-F3-exam-dumps.html
F3 Free Exam Study Guide! (Updated 255 Questions): https://drive.google.com/open?id=1WNIlSQYP5AkS4_PpApxqAUVA4rIzjNy-