New 2022 Realistic Free CIMA F3 Exam Dump Questions & Answer
F3 Practice Test Engine: Try These 255 Exam Questions
NEW QUESTION 67
Company P is a large unlisted food-processing company.
Its current profit before interest and taxation is $4 million, which it expects to be maintainable in the future.
It has a $10 million long-term loan on which it pays interest of 10%.
Corporate tax is paid at the rate of 20%.
The following information on P/E multiples is available:
Which of the following is the best indication of the equity value of Company P?
- A. $40 million
- B. $80 million
- C. $24 million
- D. $48 million
Answer: C
NEW QUESTION 68
A company's current earnings before interest and taxation are $5 million.
These are expected to remain constant for the forseeable future.
The company has 10 million shares in issue which currently trade at $3.60.
It also has a $10 million long term floating rate loan.
The current interest rate on this loan is 5%.
The company pays tax at 20%.
The company expects interest rates to increase next year to 6% and it's Price/Earnings (P/E) ratio to move to
9.5 times by the end of next year.
What percentage reduction in the share price will occur by the end of next year if the interest rate increase and the P/E movement both occur?
- A. Reduction of 1%
- B. Reduction of 0%
- C. Reduction of 5%
- D. Reduction of 7%
Answer: D
NEW QUESTION 69
An analyst has valued a company using the free cash flow valuation model.
The analyst used the following data in determining the value:
* Estimated free cashflow in 1 year's time = $100,000
* Estimated growth in free cashflow after the first year = 5% each year indefinitely
* Appropriate cost of equity = 10%
The result produced by the analyst was as follows:
Value of equity = $100,000 (1+0.05)/0.10 = $1,050,000
The analyst made a number of errors in determining the value.
By how much has the analyst undervalued the company?
- A. $950,000
- B. $2,000,000
- C. $2,100,000
- D. $1,050,000
Answer: A
NEW QUESTION 70
M 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 future?
- A. It interest rates have gone down the price of the future will have fallen.
- B. The date is flexible and the position can be closed quickly and easily.
- C. It must be kept for ne whole duration of the contract
- D. It can be tailored to the exact reeds of the company.
Answer: C
NEW QUESTION 71
Company A, a listed company, plans to acquire Company T, which is also listed.
Additional information is:
* Company A has 100 million shares in issue, with market price currently at $8.00 per share.
* Company T has 90 million shares in issue,. with market price currently at $5.00 each share.
* Synergies valued at $60 million are expected to arise from the acquisition.
* The terms of the offer will be 2 shares in A for 3 shares in B.
Assuming the offer is accepted and the synergies are realised, what should the post-acquisition price of each of Company A's shares be?
Give your answer to two decimal places.
Answer:
Explanation:
$ ? .
8.19, 8.18
NEW QUESTION 72
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.
Answer:
Explanation:
$ ? million
300, 300000000
NEW QUESTION 73
Company Z has identified four potential acquisition targets: companies A, B, C and D.
Company Z has a current equity market value of $580 million.
The price it would have to pay for the equity of each company is as follows:
Only one of the target companies can be acquired and the consideration will be paid in cash.
The following estimations of the new combined value of Company Z have been prepared for each acquisition before deduction of the cash consideration:
Ignoring any premium paid on acquisition, which acquisition should the directors pursue?
- A. D
- B. B
- C. A
- D. C
Answer: D
NEW QUESTION 74
Company 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 - $5
Shareholders 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 shares
The 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?
- A. The bond offer is only worth $100 which represents a zero premium and should be rejected.
- B. The value of the consideration given by the cash and bond offers is certain, unlike the share offer.
- C. The bond offer is above the minimum threshold and should be accepted.
- D. The share for share exchange is the only offer which is above the acceptance threshold.
Answer: D
NEW QUESTION 75
A 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 million
The 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 a 1-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.
$ ?
Answer:
Explanation:
3.64, 3.63, 3.65
NEW QUESTION 76
A manufacturing company is based in Country L whose currency is the L$.
One of the company's products is exported to Country M, a rapidly growing economy, whose currency is the M$.
In the most recent financial year:
* 100,000 units of the product were sold to customers in country M
* The unit selling price was M$12
The spot rate today is L$1 = M$5
The company has an objective of growth in total sales value in L$ of 10% a year.
If the L$ strengthens by 5% next year against the M$, what volume of sales of this product is needed next year to achieve the objective?
- A. 115,500 units
- B. 110,000 units
- C. 105,000 units
- D. 104,500 units
Answer: A
NEW QUESTION 77
MAN is a manufacturing company that is based in country M and sells almost exclusively to customers in country M, priced in the local currency, M$.
MAN wishes to expand the business by acquiring a company that manufactures similar products but has a more global customer base. It is particularly interested in selling to customers in country P, which uses currency P$ but recognises that the P$ is generally quite volatile against the M$.
Country P uses the same language as country M, has free entry of labour from country M, no exchange controls or withholding tax and a favourable double tax treaty.
Which of the following companies would be most suitable takeover candidates for MAN to investigate further?
- A. A company based in country M with a shared interest in selling in country P.
- B. A company based in country P with a global customer base including country P.
- C. A company based in country P with a large proportion of customers in country M.
- D. A company based in country M with a global customer base including country P.
Answer: B
NEW QUESTION 78
A company's Board of Directors wishes to determine a range of values for its equity.
The following information is available:
Estimated net asset values (total asset less total liabilities including borrowings):
* Net book value = $20 million
* Net realisable value = $25 million
* Free cash flows to equity = $3.5 million each year indefinitely, post-tax.
* Cost of equity = 10%
* Weighted Average Cost of Capital = 7%
Advise the Board on reasonable minimum and maximum values for the equity.
- A. Minimum value = $25.0 million, and maximum value = $35.0 million
- B. Minimum value = $25.0 million, and maximum value = $50.0 million
- C. Minimum value = $20.0 million, and maximum value = $50.0 million
- D. Minimum value = $20.0 million, and maximum value = $35.0 million
Answer: A
NEW QUESTION 79
A large, listed company in the food and household goods industry needs to raise $50 million for a period of up to 6 months.
It has an excellent credit rating and there is almost no risk of the company defaulting on the borrowings. The company already has a commercial paper programme in place and has a good relationship with its bank.
Which of the following is likely to be the most cost effective method of borrowing the money?
- A. Bank overdraft
- B. Treasury Bills
- C. Commercial paper
- D. 6 month term loan
Answer: C
NEW QUESTION 80
A listed company is planning to raise $21.6 million to finance a new project with a positive net present value of $5 million. The finance is to be raised via a rights issue at a 10% discount to the current share price. There are currently 100 million shares in issue, trading at $2.00 each.
Taking the new project into account, what would the theoretical ex-rights price be?
Give your answer to two decimal places.
Answer:
Explanation:
$ ?
2.02, 2.03
NEW QUESTION 81
Company C is a listed company. It is currently considering the acquisition of Company D.
The original founder of Company C currently owns 52% of the shares.
Alternative forms of consideration for Company D being considered are as follows:
* Cash payment, financed by new borrowing
* issue of new shares in Company C
Which of the following is an advantage of a cash offer over a share-for exchange from the viewpoint of the original founder of Company C?
- A. A share for share exchange would result in a significant change in control of Company C whereas a cash offer would not.
- B. A share-for-share exchange would require the approval of the Competition Authorities but a cash offer would not.
- C. A share-for-share exchange would require the approval shareholders in Company C but a cash offer would not.
- D. A cash offer would result in a lower gearing ratio therefore reduce the weighted overage cost of capital whereas a cash offer would not.
Answer: A
NEW QUESTION 82
Which TIIRCC of the following are most likely be primary objectives for a newly established, unincorporated entity in the service sector?
- A. Reaching an optimum capital structure
- B. Maintaining sufficient liquidity in the business to avoid overtrading
- C. Increasing Revenue
- D. Providing consistently high levels service quality
- E. Increasing the dividend payment year on year
Answer: B,C
NEW QUESTION 83
A 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 million
The 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 a
1-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.
Answer:
Explanation:
$ ?
3.64, 3.63, 3.65
NEW QUESTION 84
A product costs USD10 when purchased in the USA. The same product costs USD12 when it is purchased in the UK and the price in GBP is convened to USD.
Which of the following statement concerning purchasing power parity is correct?
- A. The exchange rate between the USD and GBP will change so that tie price differential on this product (and at other products) is eliminated.
- B. This type of price deferential is a reliable baas for predicting currency movements
- C. Economic forces will bring the prices in the USA and UK into line.
- D. Economic forces should eliminate the price difference. but there could be market imperfections that permit it to persist.
Answer: D
NEW QUESTION 85
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 a project that has an NPV of nil.
- B. Loss of a major customer that contributed 30% of sales revenue.
- C. Disposal of a loss-making division where the funds raised will be used to pay a special dividend to shareholders.
- D. The issue of a new bond where the funds raised are invested in a project that has an NPV of nil.
- E. The issue of new shares where the funds raised are invested in expanding into a new nigh risk market.
Answer: B,C,D
NEW QUESTION 86
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CIMA F3 Daily Practice Exam New 2022 Updated 255 Questions: https://drive.google.com/open?id=1CHDA5tFj63yCmWlLrXaZZEa1Kl-txAoB
