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CIMA F3 exam covers a range of topics, including financial analysis, risk management, investment decisions, and corporate finance. CIMAPRA19-F03-1 Exam is divided into two sections, each containing multiple-choice questions and case studies. The first section focuses on financial analysis and planning while the second section focuses on financial strategy and decision-making.
CIMA CIMAPRA19-F03-1 Exam Syllabus Topics:
Topic
Details
Topic 1
Topic 2
Topic 3
Topic 4
Topic 5
Topic 6
CIMA F3 certification exam covers a range of topics, including financial strategy formulation, financial risk management, investment appraisal, and corporate financing. These topics are essential for finance professionals who are involved in strategic decision-making processes and are responsible for ensuring that their organizations have a sound financial strategy.
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CIMA F3 Financial Strategy Sample Questions (Q178-Q183):
NEW QUESTION # 178
A company's statement of financial position includes non-current assets which are leased, the tax regime follows the accounting treatment.
Which cash flows should be discounted when evaluating the cost of lease finance?
Answer: A
NEW QUESTION # 179
An analyst has valued a company using the free cash flow valuation model.
The analyst used the following data in determining the value:
* Estimated free cashflow in 1 year's time = $100,000
* Estimated growth in free cashflow after the first year = 5% each year indefinitely
* Appropriate cost of equity = 10%
The result produced by the analyst was as follows:
Value of equity = $100,000 (1+0.05)/0.10 = $1,050,000
The analyst made a number of errors in determining the value.
By how much has the analyst undervalued the company?
Answer: C
NEW QUESTION # 180
A company is based in Country Y whose functional currency is Y$. 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?
Answer: D
NEW QUESTION # 181
Company A is unlisted and all-equity financed. It is trying to estimate its cost of equity.
The following information relates to another company, Company B, which operates in the same industry as Company A and has similar business risk:
Equity beta = 1.6
Debt:equity ratio 40:60
The rate of corporate income tax is 20%.
The expected premium on the market portfolio is 7% and the risk-free rate is 5%.
What is the estimated cost of equity for Company A?
Give your answer to one decimal place.
Answer:
Explanation:
? %
A. 12.3, 12.30Company B's equity beta = 1.6, D:E = 40:60, tax = 20%.Ungear B's beta to get the asset beta:#A=#E×EE+D(1#T)=1.6×6060+40(1#0.2)=1.6×6060+32=1.6×6092=1.6×1523=2423#1.04eta_A
= eta_E imes rac{E}{E + D(1-T)} = 1.6 imes rac{60}{60 + 40(1-0.2)} = 1.6 imes rac{60}
{60+32} = 1.6 imes rac{60}{92} = 1.6 imes rac{15}{23} = rac{24}{23} approx 1.04
#A=#E×E+D(1#T)E=1.6×60+40(1#0.2)60=1.6×60+3260=1.6×9260=1.6×2315=2324#1.04 Company A is all-equity, so its equity beta = asset beta = 1.04.Use CAPM:Ke=Rf+#(Rm#Rf)=5%+1.0435×7%#5%
+7.30%=12.3%K_e = R_f + eta (R_m - R_f) = 5% + 1.0435 imes 7% approx 5% + 7.30% = 12.3
%Ke=Rf+#(Rm#Rf)=5%+1.0435×7%#5%+7.30%=12.3%
B. 12.3%
NEW QUESTION # 182
A company plans to cut its dividend but is concerned that the share price will fall. This demonstrates the_____________
Answer:
Explanation:
effect
Signalling effect (information content of dividends)In CIMA F3, dividend policy is closely linked to information asymmetry between a company's management and its shareholders.
Managers typically have better information about the firm's future prospects than external investors. As a result, investors often interpret changes in dividends as signals about management's expectations of future earnings and cash flows.
The concern that cutting dividends will cause the share price to fall illustrates the signalling effect (also known as dividend signalling theory). According to this theory, a dividend cut is interpreted by the market as a negative signal, suggesting that management expects lower future profits or cash flow difficulties. Investors react by revising their expectations downward, leading to a fall in the share price.CIMA F3 study guidance contrasts this with Modigliani and Miller's dividend irrelevance theory, which assumes perfect markets and no information asymmetry. In reality, markets are imperfect, and dividends convey information. Therefore, companies are often reluctant to reduce dividends even when it may be financially prudent, due to fear of adverse market reactions.This behaviour is also linked to dividend stability, another key concept in F3, where firms prefer stable or gradually increasing dividends to avoid sending negative signals to investors.
NEW QUESTION # 183
......
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