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CIMA Updated F3 Exam Questions and Answers by ashley

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CIMA F3 Exam Overview :

Exam Name: Financial Strategy
Exam Code: F3 Dumps
Vendor: CIMA Certification: CIMA Strategic level
Questions: 435 Q&A's Shared By: ashley
Question 16

A listed company has recently announced a profit warning.

 

The company's share price fell 20% on the day of the announcement but had been fairly static in the weeks leading up to the announcement.

 

Which form of efficient market is most likely to be indicated by this share price movement?

Options:

A.

Weak form

B.

Semi-strong form

C.

Strong form

D.

Random walk

Discussion
Question 17

Company A plans to acquire Company B, an unlisted company which has been in business for 3 years.

It has incurred losses in its first 3 years but is expected to become highly profitable in the near future.

No listed companies in the country operate the same business field as Company B, a unique new high-risk business process.

The future success of the process and hence the future growth rate in earnings and dividends is difficult to determine.

Company A is assessing the validity of using the dividend growth method to value Company B.

 Which THREE of the following are weaknesses of using the dividend growth model to value an unlisted company such as Company HHG?

Options:

A.

The company has been unprofitable to date and hence, there is no established dividend payment pattern.

B.

The future projected dividend stream is used as the basis for the valuation.

C.

The future growth rate in earnings and dividends will be difficult to accurately determine. 

D.

The dividend growth model does not take the time value of money into consideration.

E.

The cost of capital will be difficult to estimate. 

Discussion
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Question 18

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 of5times.

The project is expected to generate the following results:

Questions 18

At what interest rate on the floating rate borrowings is the bank covenant first breached?

Options:

A.

10.0%

B.

11.0%

C.

8.0%

D.

9.4%

Discussion
Question 19

A company is considering the issue of a convertible bond compared to a straight bond issue (non-convertible bond).

Director A is concerned that issuing a convertible bond will upset the shareholders for the following reasons:

   • it will dilute their control

   • the interest payments will be higher therefore reducing liquidity

   • it will increase the gearing ratio therefore increasing financial risk

Director B disagrees, and is preparing a board paper to promote the issue of the convertible bond rather than a non-convertible.

 

Advise the Director B which THREE of the following statements should be included in his board paper to promote the issue of the convertible bond?

Options:

A.

The convertible bond may not dilute control as the bond holder has an option to choose conversion.

B.

The coupon rate on the convertible bond will be lower than that on a non-convertible bond.

C.

When converted into shares, the company will receive a cash inflow which can be used for future investments.

D.

Issuing a convertible bond will have a more favourable impact on the gearing ratio than a non-convertible bond.

E.

Over the life of the bond, a convertible will be more expensive than a non-convertible.

Discussion
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