Free CIMAPRO19-F03-1-ENG Exam Questions - Easiest Way for Success

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Total 305 Questions | Updated On: Sep 13, 2024

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Question 1

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

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

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

D : A 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 2

A company based in Country D, whose currency is the D$, has an objective of maintaining an operating profit

margin of at least 10?ch year.

Relevant data:

• The company makes sales to Country E whose currency is the E$. It also makes sales to Country F whose

currency is the F$.

• All purchases are from Country G whose currency is the G$.

• The settlement of all 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 D$ strengthens against the E$ over time.

B : The F$ weakens against the D$ over time.

C : The D$ strengthens against the G$ over time.

D : The D$ weakens against the G$ over time.

Answer: C

Question 3

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

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

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

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

Answer: C

Question 4

Z wishes to borrow at a floating rate and has been told that it can use swaps to reduce the effective interest rate

it pays. Z can borrow floating at Libor ' 1, and fixed at 10%.

Which of the following companies would be the most appropriate for Z to enter into a swap with?

A : Company A - it can borrow floating L +1 ½ and fixed at 9.5%

B : Company D - it can borrow at L +1 ½ and fixed at 10.5%

C : Company C - it can borrow at L +1 ½ and fixed at 9%

D : Company E - it can borrow floating at L +1 ½ and fixed at 12%

Answer: C

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: Sep 13, 2024

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