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Prepare for the CIMA F3 Financial Strategy exam with our extensive collection of questions and answers. These practice Q&A are updated according to the latest syllabus, providing you with the tools needed to review and test your knowledge.
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The questions for CIMAPRA19-F03-1 were last updated on Nov 18, 2024.
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A company is currently all-equity financed.
The directors are planning to raise long term debt to finance a new project.
The debt:equity ratio after the bond issue would be 40:60 based on estimated market values.
According to Modigliani and Miller's Theory of Capital Structurewithouttax, the company's cost of equity would:
A companyis funded by:
* $40 million of debt (market value)
* $60 million of equity (market value)
The company plans to:
* Issuea bond and usethe funds raisedto buy back shares at their current market value.
* Structure the deal so that the market value of debt becomes equal to the market value of equity.
According to Modigliani and Miller's theory with tax and assuming a corporate income tax rate of 20%, this plan would:
A UK company enters into a 5 year borrowing with bank P at a floating rate of GBP Libor plus 3%
It simultaneously enters into an interest rate swap with bank Q at 4.5% fixed against GBP Libor plus 1.5%
What is the hedged borrowing rate, taking the borrowing and swap into account?
Give your answer to 1 decimal place.
Company A operates in country A and uses currency AS. It is looking to acquire Company B which operates in country B and uses currency B$. The following information is relevant:
The assistant accountant at Company A has prepared the following valuation of company B's equity, however there are some errors in his calculations.
Value of Company B's equity = 14.16 + 16.03 + 17.67 = AS47.86 million
Company B has BS5 million of debt finance.
Which of the following THREE statements are true?
Company A has made an offer to take over all the shares in Company B on the following terms:
* For every 20 shares currently held, Company B's shareholders will receive $100 bond with a coupon rate of3%
* The bondwill berepaidin 10 years' timeat its par value of $100.
* The current yield on10 yearbonds of similar riskis 6%.
What is the effective offer price per sharebeingmade to Company B's shareholders?
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