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CIMA Updated F3 Exam Questions and Answers by idrees

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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: idrees
Question 48

A company is based in Country Y whose functional currency is Y$. It has an investment in Country Z whose functional currency is Z$.

This year the company expects to generate Z$ 10 million profit after tax.

Tax Regime:

   • Corporate income tax rate in country Y is 50%

   • Corporate income tax rate in country Z is 20%

   • Full double tax relief is available

Assume an exchange rate of Y$ 1 = Z$ 5.

 

What is the expected profit after tax in Y$ if the Z$ profit is remitted to Country Y?

Options:

A.

Y$ 1.25 million

B.

Y$ 1.00 million

C.

Y$ 31.25 million

D.

Y$ 4.00 million

Discussion
Question 49

Company A has made an offer to acquire Company Z.  

Both companies are quoted and their current market share prices are:

   • Company A - $4

   • Company Z - $5

Shareholders in company Z have been given three alternative offers:

   • Cash of $5.50 per share

   • Share for share exchange on the basis of 3 for 2

   • 10.5% long dated bond for every 20 shares

The bond is has a nominal value of $100 and the expected yield on bonds of similar risk is 10%.

 

You are advising a Company Z shareholder on the three offers.

She requires a 15% premium if she is to accept the offer. 

 

In providing your advice, which of the following statements is correct?

Options:

A.

The bond offer is only worth $100 which represents a zero premium and should be rejected.

B.

The bond offer is above the minimum threshold and should be accepted.

C.

The share for share exchange is the only offer which is above the acceptance threshold.

D.

The value of the consideration given by the cash and bond offers is certain, unlike the share offer.

Discussion
Question 50

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?

Options:

A.

Risk-free rate +6.9%

B.

Risk-free rate +8%

C.

Risk-free rate+3.1%

D.

Risk-free rate +6.5%

Discussion
Question 51

A company's Board of Directors wishes to determine a range of values for its equity.

The following information is available:

Estimated net asset values (total asset less total liabilities including borrowings):

   • Net book value = $20 million

   • Net realisable value = $25 million

   • Free cash flows to equity = $3.5 million each year indefinitely, post-tax.

   • Cost of equity = 10%

   • Weighted Average Cost of Capital = 7%

Advise the Board on reasonable minimum and maximum values for the equity.

Options:

A.

Minimum value  = $25.0 million, and maximum value = $35.0 million

B.

Minimum value = $25.0 million, and maximum value = $50.0 million

C.

Minimum value = $20.0 million, and maximum value = $35.0 million

D.

Minimum value = $20.0 million, and maximum value = $50.0 million

Discussion
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