Free CIMA CIMAPRA19-F03-1-ENG Exam Questions

Become CIMA Certified with updated CIMAPRA19-F03-1-ENG exam questions and correct answers

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Total 305 Questions | Updated On: Feb 20, 2025

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Question 1

A listed company in a high technology industry has decided to value its intellectual capital using the

Calculated Intangible Value method (CIV).

Relevant data for the company:

• Pays corporate income tax at 30%

• Cost of equity is 9%, pre-tax cost of debt is 7% and the WACC is 8%

• The value spread has been calculated as $26 million

Calculate the CIV for the company.

A : 228 million

B : 289 million

C : 531 million

D : 325 million

Answer: A

Question 2

Company A is located in Country A, where the currency is the A$.

It is listed on the local stock market which was set up 10 years ago.

It plans a takeover of Company B, which is located in Country B where the currency is the B$, and where the

stock market has been operating for over 100 years.

Company A is considering how to finance the acquisition, and how the shareholders of Company B might

respond to a share exchange or cash (paid in B$).

Which of the following is likely to explain why the shareholders of Company B would prefer a share exchange

as opposed to a cash offer?

A : would allow them to realise their investment and make a capital gain.

B : would avoid them being exposed to foreign currency risk.

C : ey would receive shares in a market that is likely to be more efficient.

D : would enable them to benefit from the future performance of the combined entity.

Answer: D

Question 3

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?ch 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

Question 4

A company's current profit before interest and taxation is $1.1 million and it is expected to remain constant for

the foreseeable future.

The company has 4 million shares in issue on which the earnings yield is currently 10%. It also has a $2

million bond in issue with a fixed interest rate of 5%.

The corporate income tax rate is 20% and is expected to remain unchanged.

Which of the following is the best estimate of the current share price?

A : $2.75

B : $2.50

C : $2.00

D : $1.10

Answer: C

Question 5

A company has just received a hostile bid. Which of the following response strategies could be considered?

A : value non-current assets

B : ison pill strategy

C : ange the Articles of Association to amend voting rights

D : proach a White Knight

Answer: D

Page: 1 / 61

Total 305 Questions | Updated On: Feb 20, 2025

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