Cima exactexam f3 Questions Bank by Frazer q156 vce pdf

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Exam Name:	Financial Strategy
Exam Code:	F3 Dumps
Vendor:	CIMA	Certification:	CIMA Strategic
Questions:	393 Q&A's	Shared By:	frazer

Question 72

G pic wishes to borrow $5 million in 6 months, for a period of 3 months. A bank has quoted the following Forward Rate Agreement (FRA) rales:

3 v 9 6.55%-6.70% 6v9 6.70%-6 90%.

G pic can borrow at 0 75% above base rate, and the base rate is currently 6.25% Concerned that base rates may rise, G pic decides that it will hedge using an FRA

At the settlement date for the FRA, the base rate has risen to 7.50%

What is the effective interest rate paid by G pic for its borrowing?

Options:

7.45

7.30

8.25

7.65

Discussion

Question 73

A company proposes to value itself based on the net present value of estimated future cash flows.

Relevant data:

• The cash flow for the next three years is expected to be £100 million each year

• The cash flow after year 3 will grow at 2% to perpetuity

• The cost of capital is 12%

The value of the company to the nearest $ million is:

Options:

$966 million

$1,260 million

$889 million

$834 million

Discussion

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Question 74

Which of the following is NOT an advantage of a share repurchase?

Options:

To return surplus cash to shareholders by avoiding a one-off dividend

To allow investors to sell shares if no active market currently exists

To reduce the cost of capital of a company by increasing the gearing level.

To enable the company to retain cash in the business for reinvestment

Discussion

Question 75

Using the CAPM, the expected return for a company is 11%. The market return is 8% and the risk free rate is 2%.

What does the beta factor used in this calculation indicate about the risk of the company?

Options: