CIMA Updated F3 Exam Questions and Answers by ariya

A company's current earnings before interest and taxation are $5 million.

These are expected to remain constant for the forseeable future.

The company has 10 million shares in issue which currently trade at $3.60.

It also has a $10 million long term floating rate loan.

The current interest rate on this loan is 5%.

The company pays tax at 20%.

The company expects interest rates to increase next year to 6% and it's Price/Earnings (P/E) ratio to move to 9.5 times by the end of next year.

What percentage reduction in the share price will occur by the end of next year if the interest rate increase and the P/E movement both occur?

ADC is planning to acquire DEF in order to benefit from the expertise of DEF's owner ‘managers Both are Listed companies. ADC is trying to decide whether to offer cash or shares in consideration for DEF's shares.

Which THREE of the following are advantages to ABC of offering shares to acquire CEF?

A company with a market capitalisation of S50million is considering raising $1 million debt to fund a new 10-year capital investment protect

The value of this issue is considered to be small in comparison to the company's market capitalisation

The company is considering whether to raise the debt finance by either a "bond private placing' or a 'public bond issue.

Which THREE of the following statements are correct?

A manufacturing company based in Country R. where the currency is the R$, has an objective of maintaining an operating profit margin of at least 10% each year

Relevant data:

• The company makes sales to Country S whose currency is the SS It also makes sales to Country T whose currency is the T$ " All purchases are from Country U whose currency is the US.

• The settlement of an transactions is in the currency of the customer or supplier

Which of the following changes would be most likely to help the company achieve its objective?