Free CIMA CIMAPRO19-F03-1-ENG Exam Questions

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

Page: 1 / 61

Total 305 Questions | Updated On: Oct 29, 2024

Add To Cart

Question 1

Company J is in negotiations to acquire Company K and believes it can turn around Company K's

performance to match its own.

The following information is available for the two companies:

Select the maximum price for each share that Company J should place on Company K during negotiations.

A : $1.7

B : $2.0

C : $3.0

D : $3.2

Answer: C

Question 2

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 : hare for share exchange would result in a significant change in control of Company C whereas a cash offer would not

B : hare-for-share exchange would require the approval shareholders in Company C but a cash offer would not.

C : hare-for-share exchange would require the approval of the Competition Authorities but a cash offer would not.

D : 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

Question 3

A listed company is financed by debt and equity.

If it increases the proportion of debt in its capital structure it would be in danger of breaching a debt covenant

imposed by one of its lenders.

The following data is relevant:

The company now requires $800 million additional funding for a major expansion programme.

Which of the following is the most appropriate as a source of finance for this expansion programme?

A : tained earnings

B : ivate placement of a bond

C : ghts issue

D : nk overdraft

Answer: C

Question 4

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?bt?

A : 11.6%

B : 11.9%

C : 9.1%

D : 13%

Answer: B

Question 5

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 : 12.00%

B : 10.16%

C : 16.24%

D : 12.54%

Answer: A

Page: 1 / 61

Total 305 Questions | Updated On: Oct 29, 2024

Add To Cart