CIMA F3 Financial Strategy CIMAPRA19-F03-1 Dumps in PDF

Company A has a cash surplus. The discount rate used for a typical project is the company's weighted average cost of capital of 10%. No investment projects will be available for at least 2 years.
Which of the following is currently most likely to increase shareholder wealth in respect of the surplus cash?

Which THREE of the following non-financial objectives would be most appropriate for a listed company in the food retailing industry?

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?

Under traditional theory, an increase in a company's WACC would cause the value of the company to:

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?

Two listed companies in the same industry are joining together through a merger.
What are the likely outcomes that will occur after the merger has happened?  Select ALL that apply.

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?

A company has forecast the following results for the next financial year:
The following is also relevant:   
* Profit after tax for the year can be assumed to be equivalent to free cash flow for the year.   
* Debt finance comprises a $10 million floating rate loan which currently carries an interest rate of 5%.   
* $400,000 investment in non-current assets is required to achieve required growth, all of which is to financed from next year's free cash flow.   
* The company plans to pay a dividend of $150,000 next year, financed from next year's free cash flow. The company is concerned that interest rates could rise next year to 6% which could then affect their investment plans.

If interest rates were to rise to 6% and the company wishes to maintain its dividend amount, the planned investment expenditure will decrease by: