[Jun 20, 2023] Get New CIMAPRA19-F03-1 Certification – Valid Exam Dumps Questions
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NEW QUESTION # 122
A company is wholly equity funded. It has the following relevant data:
* Dividend just paid $4 million
* Dividend growth rate is constant at 5%
* The risk free rate is 4%
* The market premium is 7%
* The company's equity beta factor is 1.2
Calculate the value of the company using the Dividend Growth Model.
Give your answer in $ million to 2 decimal places.
$ ? million
- A. 56.76, 56.76
- B. 56.76, 56.75
Answer: B
NEW QUESTION # 123
D has US$10 million to invest over 12 months in either USS or GBP Its options are to invest in USS at the present USS interest rate of 10 18%. or to convert the USS to GBP at the spot rate GBP1 =US$1 61 and invest in GBP at an interest rate of 6.4%.
According to the interest rate parity theory, what will the one year forward rate be?
Give your answer to three decimal places.
- A. 1.668
- B. 1.667
Answer: B
NEW QUESTION # 124
A company gas a large cash balance but its directors have been unable to identify any positive NPV projects to invest in. Which THREE of the following are advantages of a share repurchase, compared with a one-off large dividend?
- A. It means that the company will be able to pay lower total dividends in the future.
- B. It will not create an expectation for future increased dividends.
- C. It returns cash to shareholders so that they can choose hew to spend It
- D. It increases the number of shares issue.
- E. The shareholder can choose whether to take the cast or not.
Answer: B,C,E
NEW QUESTION # 125
Providers of debt finance often insist on covenants being entered into when providing debt finance for companies.
Agreement and adherence to the specific covenants is often a condition of the loan provided by the lender.
Which THREE of the following statements are true in respect of covenants?
- A. Covenants are entered into to give the lender added protection on the loan extended to the company.
- B. Covenants are entered into to penalise the company.
- C. Covenants are entered into to impose financial discipline on the company.
- D. Covenants are entered into to eliminate the tax liability of the company.
- E. Covenants enable the lender to demand immediate repayment or to renegotiate terms if it is breached.
Answer: A,C,E
Explanation:
Explanation
Discursive_F0
NEW QUESTION # 126
Company WWW is considering making a takeover bid for Company KKA Company KKA's current share price is $5.00
Company WWW is considering either
" A cash payment of $5.75 for each share in Company KKA
" A 5 year corporate bond with a market value of $90 in exchange for 15 shares in Company KKA
Calculate the highest percentage premium which Company KKA shareholders will receive.
- A. Corporate bond premium = 80%
- B. Corporate bond premium = 20%
- C. Cash premium = 15%
- D. Cash premium = 10%
Answer: B
NEW QUESTION # 127
A company has a loss-making division that it has decided to divest in order to raise cash for other parts of the business.
The losses stem from a combination of a lack of capital investment and poor divisional management.
The loss-making division would require new capital investment of at least $20 million in order to replace worn out and obsolete assets.
If this investment was carried out, the present value of the future cashflows, excluding the investment expenditure, is expected to be $15 million.
Which TWO of the following divestment methods are most likely to be suitable for the company?
- A. De-merger
- B. Liquidation
- C. Spin-off
- D. Trade sale
- E. Management buy-out
Answer: B,D
NEW QUESTION # 128
Company A is planning to acquire Company B at a price of $ 65 million by means of a cash bid.
Company A is confident that the merged entity can achieve the same price earnings ratio as that of Company A.
What does Company A expect the value of the merged entity to be post acquisition?
- A. $156.0 million
- B. $187.5 million
- C. $122.5 million
- D. $207.0 million
Answer: C
NEW QUESTION # 129
Which of the following statements is true of a spin-off (or demerger)?
- A. Allows investors to identify the true value of the demerged business.
- B. Increases the risk of a takeover bid for the core entity.
- C. Raises finance to fund new projects.
- D. Changes the ownership structure of the core entity by introducing new shareholders.
Answer: A
NEW QUESTION # 130
A company is considering whether to lease or buy an asset.
The following data applies:
* The bank will charge interest at 7.14% per annum
* The asset will cost $1 million
* Tax-allowable depreciation is available on a straight line basis over 5 years
* There is no residual value
* Corporate tax is paid at 30% in the year when the profit is earned
What is the NPV of the buy option?
Give your answer to the nearest $000.
$ ?
Answer:
Explanation:
740
NEW QUESTION # 131
Integrated reporting is designed to make visible the capitals on which the organisation depends, and how the organisation uses those capitals to create value in the short, medium and long term
Which THREE of the following capitals are specifically identified in the Integrated Reporting <IR> Framework?
- A. Community
- B. Human
- C. Manufactured
- D. Financial
- E. Research and Development
Answer: B,C
NEW QUESTION # 132
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 0%
- B. Reduction of 1%
- C. Reduction of 5%
- D. Reduction of 7%
Answer: D
NEW QUESTION # 133
The ex div share price of Company A's shares is $.3.50
An investor in Company A currently holds 2,000 shares.
Company A plans to issue a script divided of 1 new shares for every 10 shares currently held.
After the scrip divided, what will be the total wealth of the shareholder?
Give your answer to the nearest whole $.
- A. 0
- B. 1
Answer: B
Explanation:
NEW QUESTION # 134
A company intends to sell one of its business units. Company W, by a management buyout (MBO). A selling price of S200 million has been agreed.
The managers are discussing with a bank and a venture capital company (VCC) the following financing proposal.
The VCC requires a minimum return on its equity investment In the MBO of 35% a year on a compound basis over 5 years What is the minimum total equity value of Company W in 5 years time in order to meet the VCC's required return? Give your answer to one decimal place.
Answer:
Explanation:
65
NEW QUESTION # 135
Company A needs to raise AS500 mi lion to invest in a new project and is considering using a pub ic issue of bonds to finance the investment.
Which THREE of the following statements-relating to this bond issue are true?
- A. Purchasing bonds in the capital markets enables entities to borrow large amounts of finance.
- B. A company must be listed before it can issue bones.
- C. Bonds issues in the corporate debt market are underwritten.
- D. The bond market is unregulated making it easier to raise finance
- E. The largest issuer of bond i3 the government.
Answer: A,B,E
NEW QUESTION # 136
A company's latest accounts show profit after tax of $20.0 million, after deducting interest of $5.0 million. The company expects earnings to grow at 5% per annum indefinitely.
The company has estimated its cost of equity at 12%, which is included in the company WACC of 10%.
Assuming that profit after tax is equivalent to cash flows, what is the value of the equity capital?
Give your answer to the nearest $ million.
$ ? million
Answer:
Explanation:
300, 300000000
NEW QUESTION # 137
Company X is based in Country A, whose currency is the A$.
It trades with customers in Country B, whose currency is the B$.
Company X aims to maintain its revenue from exports to Country B at 25% of total revenue.
Company A has the following forecast revenue:
The forecast revenue from Country B has assumed an exchange rate of A$1/B$2, that is A$1 = B$2.
If the B$ depreciates against the A$ by 10%, the ratio of revenue generated from Country B as a percentage of total revenue will:
- A. fall to 23.3%.
- B. fall to 22.7%.
- C. rise to 30.3%.
- D. rise to 27.0%.
Answer: A
NEW QUESTION # 138
A listed company follows a policy of paying a constant dividend. The following information is available:
* Issued share capital (nominal value $0.50) $60 million
* Current market capitalisation $480 million
The shareholders are requesting an increased dividend this year as earnings have been growing. However, the directors wish to retain as much cash as possible to fund new investments. They therefore plan to announce a 1-for-10 scrip dividend to replace the usual cash dividend.
Assuming no other influence on share price, what is the expected share price following the scrip dividend?
Give your answer to 2 decimal places.
$ ?
Answer:
Explanation:
3.64, 3.63, 3.65
NEW QUESTION # 139
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