Free CIMAPRA19-F03-1-ENG Exam Questions - Easiest Way for Success

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Total 305 Questions | Updated On: Sep 12, 2024

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Question 1

The International Integrated Reporting Council (IIRC) was formed in August 2010 and brings together a

cross-section of representatives from a wide variety of business sectors.

The primary purpose of the IIRC's framework is to help enable an organsation to communicate how it:

A : minimises the environmental impact of its business processes.

B : creates value in the short, medium and long term.

C : contributes positively to the economic well being of the environment in which it operates.

D : ensures that the conflicting needs of different stakeholder groups are met in an optimal manner.

Answer: B

Question 2

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 : $80 million

B : $40 million

C : $48 million

D : $24 million

Answer: D

Question 3

Which THREE of the following statements are correct?

A : A portfolio can be diversified by increasing the number of securities in different industries held in the portfolio.

B : Systematic risk can be eliminated in a diversified portfolio.

C : The beta of a company's shares reflects systematic risk.

D : A beta of 1 indicates that the investment is risk free.

E : The security market line (SML) shows the relationship between systematic risk and return.

Answer: A,C

Question 4

H Company has a fixed rate load at 10.0%, but wishes to swap to variable. It can borrow at LIBOR 8%.

The bank is currently quoting swap rates of 3.1% (bid) and 3.5% (ask).

What net rate will H Company pay if it enters into the swap?

A : LIBOR +6.5%

B : LIBOR +8%

C : LIBOR +6.9%

D : LIBOR +3.1%

Answer: C

Question 5

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

Page: 1 / 61

Total 305 Questions | Updated On: Sep 12, 2024

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