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CIMA F3 Certification Exam is a challenging and rewarding experience for individuals who want to advance their career in finance. F3 exam provides a comprehensive understanding of financial management principles and techniques, and equips candidates with the skills needed to succeed in the modern business world. Whether you are a finance professional seeking to enhance your knowledge or an aspiring financial strategist, the CIMA F3 Certification Exam is a valuable qualification that can open doors to new opportunities and career growth.
NEW QUESTION # 164
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. $4.25
- B. $4.00
- C. $4.75
- D. $4.50
Answer: D
NEW QUESTION # 165
The ex div share price of a company's shares is $2.20.
An investor in the company currently holds 1,000 shares.
The company plans to issue a scrip dividend of 1 new share for every 10 shares currently held.
After the scrip dividend, what will be the total wealth of the shareholder?
Give your answer to the nearest whole $.
Answer:
Explanation:
$ ? .
2200
NEW QUESTION # 166
On 1 January 20X1 a company entered into a S200 million interest rate swap with a bank at a fixed rate of 4% against the 6-month risk-free rate to hedge the interest rale risk on a floating rate borrowing.
6-month risk-free rate was as follows:
What is the net settlement due under the swap contract on 1 July 20X1?
- A. S1 500.000 net payment by the company.
- B. $1.500.000 net receipt to the company.
- C. $1 000 000 net receipt to the company.
- D. S1 000 000 net payment by the company.
Answer: A
NEW QUESTION # 167
An entity prepares financial statements to 30 June.
During the year ended 30 June 20X2 the following events occurred:
1 July 20X1
* The entitiy borrowed $100 million at a variable rate of interest.
* In order to protect itself against the variability of its interest cashflows, the entity entered into a pay- fixed-receive-variable interest swap with annual settlements. The fair value of the swap on this date was zero.
30 June 20X2
* The entity received a net settlement of $2 million under the swap. After this net settlement, the fair value of the swap was $5 million - a financial asset.
The entity decides to use hedge accounting for this arrangement and has designated it as a cash flow hedge. The swap is a perfect hedge of the variability of the cash interest payments.
Which of the following describes the treatment of the settlement and the change in the fair value of the swap in the statement of profit or loss and other comprehensive income for the year ended 30 June
20X2?
- A. $5 million is recognised in profit or loss and $2 million is recognised in other comprehensive income.
- B. $2 million is recognised in profit or loss and $5 million is recognised in other comprehensive income.
- C. $7 million is recognised in profit or loss.
- D. $7 million is recognised in other comprehensive income.
Answer: B
NEW QUESTION # 168
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. Foreign subsidiary: A$35,000
- B. Domestic: A$33,750
- C. Domestic: A$41,250
- D. Foreign subsidiary: A$38,500
Answer: A
NEW QUESTION # 169
Extracts from a company's profit forecast for the next financial year is 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 2,000 million ordinary shares currently in issue and cancelling them.
Assuming the share repurchase went ahead, the impact on the company's forecast earnings per share will be an increase of:
- A. $0,050
- B. $0,100
- C. $0,075
- D. $0,125
Answer: A
NEW QUESTION # 170
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. A decrease in the volatility of the share.
- D. An increase in the strike price.
Answer: B
NEW QUESTION # 171
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 20% and the EPS will increase by 25%.
- B. The cash balance will decrease by 75% and EPS will increase by 25%.
- C. The cash balance will decrease by 75% and EPS will decrease by 25%.
- D. The cash balance will decrease by 20% and the EPS will decrease by 25%.
Answer: B
NEW QUESTION # 172
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. $0.125
- B. $0.175
- C. $0.200
- D. $0.100
Answer: D
NEW QUESTION # 173
Company Z has identified four potential acquisition targets: companies A, B, C and D.
Company Z has a current equity market value of $580 million.
The price it would have to pay for the equity of each company is as follows:
Only one of the target companies can be acquired and the consideration will be paid in cash.
The following estimations of the new combined value of Company Z have been prepared for each acquisition before deduction of the cash consideration:
Ignoring any premium paid on acquisition, which acquisition should the directors pursue?
- A. B
- B. A
- C. C
- D. D
Answer: C
NEW QUESTION # 174
A company is reporting under IFRS 7 Financial Instruments: Disclosures for the first time and the directors are concerned about whether this will lead to the disclosure of information that could affect the company's share price.
The company is based in a country that uses the A$ but 40% of revenue relates to export sales to the USA and priced in US$.
When the company reports under IFRS 7 for the first time, the share price is most likely to:
- A. Increase due to greater clarity of information available on the extent of US$ risks and how they are managed.
- B. Either increase or decrease depending on market reaction to new information on how financial risk is managed.
- C. Stay the same since US$ risk can already be quantified from segmental analysis disclosures included elsewhere in the annual report.
- D. Decrease since investors place a lower value on higher risk businesses.
Answer: B
NEW QUESTION # 175
A company has undertaken a transaction with its shareholders which has had the following impact on its financial statements:
* Retained earnings has decreased
* Share capital has increased
* Earnings per share has decreased
* The book value of equity is unchanged
The company has undertaken a:
- A. scrip dividend.
- B. cash dividend.
- C. share repurchase.
- D. rights issue.
Answer: A
NEW QUESTION # 176
A manufacturing company based in Country R. where the currency is the R$, has an objective of maintaining an operating profit margin of at least 10% each year Relevant data:
* The company makes sales to Country S whose currency is the SS It also makes sales to Country T whose currency is the T$ " All purchases are from Country U whose currency is the US.
* The settlement of an transactions is in the currency of the customer or supplier Which of the following changes would be most likely to help the company achieve its objective?
- A. The R$ weakens against the U$ over time
- B. The R$ strengthens against the U$ over time.
- C. The R$ strengthens against the S$ over time.
- D. The T$ weakens against the R$ over time
Answer: B
NEW QUESTION # 177
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.
$ ?
- A. 2.02, 1.03
- B. 2.02, 2.03
Answer: B
NEW QUESTION # 178
Company H is considering the valuation of an unlisted company which it hopes to acquire.
It has obtained the target company's financial statements.
Company H has been advised that the book value of net assets as shown in the financial statements of the target company does not provide a reliable indicator of their true value.
Advise the Board of Directors which of the following THREE statements are disadvantages of the net asset basis of valuation?
- A. The net realisable value is usually different from the net book value shown in the financial statements.
- B. The net book value of current assets is normally a reliable indicator of their realisable value.
- C. The net book value of assets can be obtained from the financial statements.
- D. Intangible assets are often not shown in the company's financial statements.
- E. The net book value of assets is merely a record of past transactions which complies with accounting conventions.
Answer: A,D,E
NEW QUESTION # 179
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. 1 share in Company X for 2.75 shares in Company Y
- B. 2 shares in Company X for 1 shares in Company Y
- C. 3 shares in Company X for 5 shares in Company Y
- D. 1 share in Company X for 2 shares in Company Y
Answer: C
NEW QUESTION # 180
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