Free CIMA CIMAPRO19-F03-1-ENG Exam Questions

Become CIMA Certified with updated CIMAPRO19-F03-1-ENG exam questions and correct answers

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Total 305 Questions | Updated On: Jan 07, 2025

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Question 1

A company financed by equity and debt can be valued by discounting:

A : ee cash flow before interest at WACC.

B : ee cash flow before interest at the cost of equity.

C : ee cash flow after interest at WACC.

D : ee cash flow after interest at the cost of equity.

Answer: A

Question 2

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 : can be tailored to the exact reeds of the company.

B : interest rates have gone down the price of the future will have fallen.

C : must be kept for ne whole duration of the contract

D : date is flexible and the position can be closed quickly and easily.

Answer: C

Question 3

The Treasurer of Z intends to use interest rate options to set an interest rate cap on Z’s borrowings. Which of the following statement is correct?

A : Treasurer should buy an interested rate floor and sell an interested cap ta the same time

B : Treasurer will retain the benefit of movcTcnt3 in interest ratc3 below the floor limit.

C : cost of a collar is lower than the cost of a cap a one.

D : Treasurer will have to negotiate the options with Z's Dark

Answer: C

Question 4

A company has accumulated a significant amount of excess cash which is not required for investment for the

foreseeable future.

It is currently on deposit, earning negligible returns.

The Board of Directors is considering returning this excess cash to shareholders using a share repurchase

programme.

The majority of shareholders are individuals with small shareholdings.

Which THREE of the following are advantages of the company undertaking a share repurchase programme?

A : dividual shareholders can realise their investment if they wish.

B : earnings per share should increase for the shareholders who do not sell their shares.

C : reduces excess cash which might have been attractive to predators.

D : reduces the amount of cash for potential future investment opportunities.

E : titutional investors generally prefer a constant predictable income in the form of dividends.

Answer: A,B,C

Question 5

A company is undertaking a lease-or-buy evaluation, using the post-tax cost of bank borrowing as the discount

rate.

Details of the two alternatives are as follows:

Buy option:

• To be financed by a bank loan

• Tax depreciation allowances are available on a reducing-balance basis

• Assets depreciated on a straight-line basis

Lease option:

• Finance lease

• Maintenance to be paid by the lessee

• Tax relief available on interest payments and book depreciation

Which THREE of the following are relevant cashflows in the lease-or-buy appraisal?

A : x relief on tax depreciation allowances

B : nk loan payments

C : intenance payments

D : ase payments

E : x relief on the book depreciation

Answer: A,D

Page: 1 / 61

Total 305 Questions | Updated On: Jan 07, 2025

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