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: Oct 25, 2026

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Question 1

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 2

A company plans to acquire new machinery.

It has two financing options; buy outright using a bank loan, or a finance lease.

Which of the following is an advantage of a finance lease compared with a bank loan?

A : is "off-balance sheet" and will not affect the company's gearing.

B : interest rate offered might be more favourable because the lessor has the security of the asset.

C : x depreciation allowances may be passed on to the company by the lessor.

D : lessor provides maintenance of the asset.

Answer: B

Question 3

A company has a covenant on its 5% long term corporate bond.

• Covenant - The earnings must not fall below $7 million

The bond has a nominal value of $60 million.

It is currently trading at 80% of its nominal value.

The projected earnings before interest and taxation for next year are $11.5 million.

The company retains 80% of its earnings. It pays tax at 20%.

Advise the Board of Directors which of the following covenant conditions will apply next year?

A : earnings will be = $7.28 million (The covenant will not be breached).

B : earnings will be = $11.50 million (The covenant will not be breached).

C : earnings will be = $6.80 million (The covenant will be breached).

D : earnings will be = $5.44 million (The covenant will be breached).

Answer: C

Question 4

A company has 6 million shares in issue. Each share has a market value of $4.00.

$9 million is to be raised using a rights issue.

Two directors disagree on the discount to be offered when the new shares are issued.

• Director A proposes a discount of 25%

• Director B proposes a discount of 30%

Which THREE of the following statements are most likely to be correct?

A : theoretical ex-rights price will be higher under Director B's proposal than under Director A's proposal.

B : re shares will be issued under Director B's proposal than under Director A's proposal.

C : rights issue price will be $3.00 under Director A's proposal.

D : terms of the rights issue will be one new share for every two existing shares under Director A's proposal

E : areholder wealth will be higher under Director A's proposal than under Director B's proposal.

Answer: B,C,D

Question 5

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

Page: 1 / 61

Total 305 Questions | Updated On: Oct 25, 2026

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