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: Dec 03, 2021

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Question 1

A company is planning to issue a 5 year $100 million bond at a fixed rate of 6%.

It is also considering whether or not to enter into a 10 year $100 million swap to receive 5% fixed and pay

Libor + 1% once a year.

The company predicts that Libor will be 4% over the life of the 5 years.

What is the impact of the swap on the company's annual interest cost assuming that

the Libor prediction is correct?

A : crease by 1%.

B : ll by 1%.

C : main the same.

D : ll by 2%.

Answer: C

Question 2

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 3

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 4

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 5

A company is funded by:

• $40 million of debt (market value)

• $60 million of equity (market value)

The company plans to:

• Issue a bond and use the funds raised to buy back shares at their current market value.

• Structure the deal so that the market value of debt becomes equal to the market value of equity.

According to Modigliani and Miller's theory with tax and assuming a corporate income tax rate of 20%, this

plan would:

A : crease the company's asset beta.

B : crease the company's equity beta.

C : crease shareholder wealth.

D : crease the market value of the company's equity.

Answer: C

Page: 1 / 61

Total 305 Questions | Updated On: Dec 03, 2021

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