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: Mar 13, 2026

Add To Cart

Question 1

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

Question 2

The Treasurer of Z intends to use interest rate options to set an interest rate cap on Z’s borrowings. Which of the following statement is correct?

A : Treasurer should buy an interested rate floor and sell an interested cap ta the same time

B : Treasurer will retain the benefit of movcTcnt3 in interest ratc3 below the floor limit.

C : cost of a collar is lower than the cost of a cap a one.

D : Treasurer will have to negotiate the options with Z's Dark

Answer: C

Question 3

A company financed by equity and debt can be valued by discounting:

A : ee cash flow before interest at WACC.

B : ee cash flow before interest at the cost of equity.

C : ee cash flow after interest at WACC.

D : ee cash flow after interest at the cost of equity.

Answer: A

Question 4

A listed company in a high growth industry, where innovation is a key driver of success has always operated a

residual dividend policy, resulting in volatility in dividends due to periodic significant investments in research

and development.

The company has recently come under pressure from some investors to change its dividend policy so that

shareholders receive a consistent growing dividend. In addition, they suggested that the company should use

more debt finance.

If the suggested change is made to the financial policies, which THREE of the following statements are true?

A : may give a signal to the market that the company is entering a period of stable growth.

B : ere may be a change to the shareholder profile due to 'the clientele effect'.

C : directors will not have to take shareholder dividend preferences into consideration in future.

D : tained earnings have a lower cost than debt finance.

E : company's financial risk will increase due to its increased use of debt finance.

Answer: A,B

Question 5

Company A needs to raise AS500 mi lion to invest in a new project and is considering using a pub ic issue of

bonds to finance the investment.

Which THREE of the following statements-relating to this bond issue are true?

A : company must be listed before it can issue bones.

B : largest issuer of bond i3 the government.

C : rchasing bonds in the capital markets enables entities to borrow large amounts of finance.

D : bond market is unregulated making it easier to raise finance

E : nds issues in the corporate debt market are underwritten.

Answer: A,B,C

Page: 1 / 61

Total 305 Questions | Updated On: Mar 13, 2026

Add To Cart