Authentic CIMA F3 Exam Dumps PDF - Apr-2023 Updated
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To take the CIMA F3 Exam, candidates must have completed the CIMA Operational and Management levels or hold an equivalent qualification. It is recommended that candidates also have practical experience in financial management or related areas. The exam is computer-based and is available to take at CIMA-approved test centers worldwide.
NEW QUESTION # 33
A company is concerned that a high proportion of its debt portfolio consists of variable rate finance with an interest rate of LIBOR ' 1 .0%.
It is considering using an interest rate swap to reduce interest rate risk out is concerned about additional finance cost this might create.
A bank has quoted swap rates of 3% 3.5% against LIBOR.
A bank has quoted swap rates of 3% 3.5% against LIBOR.
Is an interest rate swap likely to be beneficial to the company at current LIBOR rates?
- A. No, because it would be cheaper to repay variable rate finance aid enter into new fixed rate finance than to enter into an interest rate swap.
- B. Yes, because interest cost will decrease with the interest rate swap in place.
- C. Yes, because it will have lower interest rate risk and interest cost remains the same.
- D. No, because interest cost will increase with the interest rate swap in place.
Answer: C
NEW QUESTION # 34
An aerospace company is planning to diversify into car manufacturing.
Relevant data:
What is the the cost of equity to be used in the WACC for the project appraisal?
Give your answer in percentage, as a whole number.
? %
Answer:
Explanation:
19
NEW QUESTION # 35
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. $40 million
- B. $80 million
- C. $48 million
- D. $24 million
Answer: D
NEW QUESTION # 36
The following information relates to Company A's current capital structure:
Company A is considering a change in the capital structure that will increase gearing to 30:70 (Debt:Equity).
The risk -free rate is 3% and the return on the market portfolio is expected to be 10%.
The rate of corporate tax is 25%
Using the Capital Asset Pricing Model, calculate the cost of equity resulting from the proposed change to the capital structure.
- A. 10.1%
- B. 12.3%
- C. 9.3%
- D. 11.4%
Answer: B
NEW QUESTION # 37
Company A, a listed company, plans to acquire Company T, which is also listed.
Additional information is:
* Company A has 150 million shares in issue, with market price currently at $7.00 per share.
* Company T has 120 million shares in issue,. with market price currently at $6.00 each share.
* Synergies valued at $50 million are expected to arise from the acquisition.
* The terms of the offer will be 2 shares in A for 3 shares in T.
Assuming the offer is accepted and the synergies are realised, what should the post-acquisition price of each of Company A's shares be?
Give your answer to two decimal places.
Answer:
Explanation:
8.24
NEW QUESTION # 38
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. The date is flexible and the position can be closed quickly and easily.
- B. It can be tailored to the exact reeds of the company.
- C. It interest rates have gone down the price of the future will have fallen.
- D. It must be kept for ne whole duration of the contract
Answer: D
NEW QUESTION # 39
HHH Company has a fixed rate loan at 10.0%, but wishes to swap to variable. It can borrow at the risk-free rate +8%. The bank is currently quoting swap rates of 3.1% (bid) and 3.5% (ask). What net rate will HHH Company pay if it enters into the swap?
- A. Risk-free rate +8%
- B. Risk-free rate +6.5%
- C. Risk-free rate +6.9%
- D. Risk-free rate+3.1%
Answer: D
NEW QUESTION # 40
A company currently has a 5.25% fixed rate loan but it wishes to change the interest style of the loan to variable by using an interest rate swap directly with the bank.
The bank has quoted the following swap rate:
* 4.50% - 455% in exchange for Libor
Libor is currently 4%.
If the company enters into the swap and Libor remains at 4%. what will the company's interest cost be?
- A. 4.00%
- B. 4.75%
- C. 4.70%
- D. 5.25%
Answer: A
NEW QUESTION # 41
A company is considering taking out $10.000,000 of floating rate bank borrowings to finance a new project.
The current rate available to the company on floating rate barrowings is 8%. The borrowings contain a covenant based on an interested cover of 5 times.
The project is expected to generate the following results:
At what interest rate on the floating rate borrowings is the bank covenant first breached?
- A. 11.0%
- B. 10.0%
- C. 8.0%
- D. 9.4%
Answer: A
NEW QUESTION # 42
Select the category of risk for each of the descriptions below:
Answer:
Explanation:
NEW QUESTION # 43
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. The cost of a collar is lower than the cost of a cap a one.
- B. The Treasurer will retain the benefit of movcTcnt3 in interest ratc3 below the floor limit.
- C. The Treasurer should buy an interested rate floor and sell an interested cap ta the same time
- D. The Treasurer will have to negotiate the options with Z's Dark
Answer: A
NEW QUESTION # 44
A company's statement of financial position includes non-current assets which are leased, the tax regime follows the accounting treatment.
Which cash flows should be discounted when evaluating the cost of lease finance?
- A. Lease payments, implied interested and straight-line accounting deprediation.
- B. Lease payments and straight-line accounting depreciation.
- C. Lease payments and implied interest.
- D. Lease payments, tax relief on implied interest and tax relief on straight-line account depreciation.
Answer: B
NEW QUESTION # 45
Which TIIRCC of the following are most likely be primary objectives for a newly established, unincorporated entity in the service sector?
- A. Maintaining sufficient liquidity in the business to avoid overtrading
- B. Increasing Revenue
- C. Reaching an optimum capital structure
- D. Providing consistently high levels service quality
- E. Increasing the dividend payment year on year
Answer: A,B
NEW QUESTION # 46
Company X is based in Country A, whose currency is the A$.
It trades with customers in Country B, whose currency is the B$.
Company X aims to maintain its revenue from exports to Country B at 25% of total revenue.
Company A has the following forecast revenue:
The forecast revenue from Country B has assumed an exchange rate of A$1/B$2, that is A$1 = B$2.
If the B$ depreciates against the A$ by 10%, the ratio of revenue generated from Country B as a percentage of total revenue will:
- A. fall to 23.3%.
- B. rise to 30.3%.
- C. rise to 27.0%.
- D. fall to 22.7%.
Answer: A
NEW QUESTION # 47
A private company was formed five years ago and is currently owned and managed by its five founders. The founders, who each own the same number of shares have generally co-operated effectively but there have also been a number of areas where they have disagreed
The company has grown significantly over this period by re-investing its earnings into new investments which have produced excellent returns
The founders are now considering an Initial Public Offering by listing 70% of the shares on the local stock exchange
Which THREE of the following statements about the advantages of a listing are valid?
- A. Reduces agency conflict
- B. Increases dividend payouts
- C. Helps access to wider sources of finance.
- D. Provides an exit route for the founders
- E. Increases the profile and reputation of the business.
Answer: C,D,E
NEW QUESTION # 48
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
- A. The date is flexible and the position can be closed quickly and easily.
- B. It can be tailored to the exact reeds of the company.
- C. It interest rates have gone down the price of the future will have fallen.
- D. It must be kept for ne whole duration of the contract
Answer: D
NEW QUESTION # 49
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