CIMAPRA19-F03-1-ENG MCQs CIMAPRA19-F03-1-ENG TestPrep CIMAPRA19-F03-1-ENG Study Guide
CIMAPRA19-F03-1-ENG Practice Test CIMAPRA19-F03-1-ENG Exam Questions
killexams.com
F3 Financial Strategy
https://killexams.com/pass4sure/exam-detail/CIMAPRA19-F03-1-ENG
Question: 70
A company’s main objective is to achieve an average growth in dividends of 10% a year. In the most recent financial year:
Sales are expected to grow at 8% a year over the next 5 years. Costs are expected to grow at 5% a year over the next 5 years.
What is the minimum dividend payout ratio in 5 years’ time that would allow the company to achieve its objective? A . 21.7%
B . 30.0%
C . 27.5%
D . 22.5%
Question: 71
A company has in a 5% corporate bond in issue on which there are two loan covenants.
Interest cover must not fall below 3 times
Retained earnings for the year must not fall below $3.5 million The Company has 200 million shares in issue.
The most recent dividend per share was $0.04.
The Company intends increasing dividends by 10% next year. Financial projections for next year are as follows:
Advise the Board of Directors which of the following will be the status of compliance with the loan covenants next year?
A . The company will be in compliance with both covenants. B . The company will be in breach of both covenants.
C . The company will breach the covenant in respect of retained earnings only.
D . The company will be in breach of the covenant in respect of interest cover only.
Question: 72
Which THREE of the following remain unchanged over the life of a 10 year fixed rate bond? A . The coupon rate
B . The yield
C . The market value D . The nominal value
E . The amount payable on maturity
Question: 73
A company has some 7% coupon bonds in issue and wishes to change its interest rate profile. It has decided to do this by entering into a plain coupon interest rate swap with it’s bank.
The bank has quoted a swap rate of: 6.0% – 6.5% fixed against LIBOR.
What will the company’s new interest rate profile be? A . VARIABLE at LIBOR
B . VARIABLE at LIBOR + 0.5% C . VARIABLE at LIBOR + 1.0% D . FIXED at 6.5%
Question: 74
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?
A . Reduction of 7%
B . Reduction of 5% C . Reduction of 1% D . Reduction of 0%
Question: 75
A company financed by equity and debt can be valued by discounting: A . free cash flow before interest at WAC
C . free cash flow before interest at the cost of equity. D . free cash flow after interest at WAC
F . free cash flow after interest at the cost of equity.
Question: 76
A company has a covenant on its 5% long-term bond, stipulating that its retained earnings must not fall below $2 million.
The company has 100 million shares in issue.
Its most recent dividend was $0.045 per share. It has committed to grow the dividend per share by 4% each year. The nominal value of the bond is $60 million. It is currently trading at 80% of its nominal value.
Next year’s earnings before interest and taxation are projected to be $11.25 million. The rate of corporate tax is 20%.
If the company increases the dividend by 4%, advise the Board of Directors if the level of retained earnings will comply with the covenant?
A . Covenant is not breached as retained earnings = $2.40 million. B . Covenant is not breached as retained earnings = $2.10 million. C . Covenant is breached as retained earnings = $1.92 million.
D . The covenant is not breached as retained earnings = $4.68 million.
Question: 77
A company wishes to raise additional debt finance and is assessing the impact this will have on key ratios. The following data currently applies:
Profit before interest and tax for the current year is $500,000
Long term debt of $300,000 at a fixed interest rate of 5%
250,000 shares in issue with a share price of $8
The company plans to borrow an additional $200,000 on the first day of the year to invest in new project which will improve annual profit before interest and tax by $24,000.
The additional debt would carry an interest rate of 3%.
Assume the number of shares in issue remain constant but the share price will increase to $8.50 after the investment. The rate of corporate income tax is 30%.
After the investment, which of the following statements is correct? A . Interest cover will fall; P/E ratio will fall.
B . Interest cover will fall; P/E ratio will rise. C . Interest cover will rise; P/E ratio will rise. D . Interest cover will rise; P/E ratio will fall.
Question: 78
A company based in Country D, whose currency is the D$, has an objective of maintaining an operating profit margin of at least 10% each year.
Relevant data:
The company makes sales to Country E whose currency is the E$. It also makes sales to Country F whose currency is the F$.
All purchases are from Country G whose currency is the G$.
The settlement of all transactions is in the currency of the customer or supplier.
Which of the following changes would be most likely to help the company achieve its objective? A . The D$ strengthens against the E$ over time.
B . The F$ weakens against the D$ over time.
C . The D$ strengthens against the G$ over time. D . The D$ weakens against the G$ over time.
Question: 79
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 B?
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.
Question: 80
A company’s gearing (measured as debt/(debt + equity)) is currently 60% and it is investigating whether an optimal gearing structure exists within the industry.
It has analysed the capital structure of similar companies in the industry and it would appear that there is evidence supporting the traditional theory of capital structure. Companies with the lowest WACC in the industry have gearing of around 45% to 50%.
Which of the following actions would result in the company achieving a more optimal capital structure? A . Undertaking a rights issue of equity to repay some of its debt.
B . Refinancing to replace some of its short term debt with long term debt. C . Increasing the level of dividend to return more cash to shareholders.
D . Using retained cash to undertake a buyback of some of its equity.
KILLEXAMS.COM
Killexams.com is a leading online platform specializing in high-quality certification exam preparation. Offering a robust suite of tools, including MCQs, practice tests, and advanced test engines, Killexams.com empowers candidates to excel in their certification exams. Discover the key features that make Killexams.com the go-to choice for exam success.
Killexams.com provides exam questions that are experienced in test centers. These questions are updated regularly to ensure they are up-to-date and relevant to the latest exam syllabus. By studying these questions, candidates can familiarize themselves with the content and format of the real exam.
Killexams.com offers exam MCQs in PDF format. These questions contain a comprehensive
collection of questions and answers that cover the exam topics. By using these MCQs, candidate can enhance their knowledge and improve their chances of success in the certification exam.
Killexams.com provides practice test through their desktop test engine and online test engine. These practice tests simulate the real exam environment and help candidates assess their readiness for the actual exam. The practice test cover a wide range of questions and enable candidates to identify their strengths and weaknesses.
Killexams.com offers a success guarantee with the exam MCQs. Killexams claim that by using this materials, candidates will pass their exams on the first attempt or they will get refund for the purchase price. This guarantee provides assurance and confidence to individuals preparing for certification exam.
Killexams.com regularly updates its question bank of MCQs to ensure that they are current and reflect the latest changes in the exam syllabus. This helps candidates stay up-to-date with the exam content and increases their chances of success.