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CIMA CIMAPRA19-F03-1 (F3 Financial Strategy) Certification Exam is an internationally recognized certification designed to validate the skills and knowledge of finance professionals. F3 Financial Strategy certification exam is part of the CIMA Professional Qualification program and focuses on financial strategy and management. It is ideal for individuals who want to enhance their financial management expertise and take their careers to the next level.
CIMA CIMAPRA19-F03-1 exam is an essential certification for finance professionals who want to demonstrate their expertise in financial strategy and management. F3 Exam covers a broad range of topics and requires a thorough understanding of financial concepts and their application in real-world scenarios. Candidates will need to demonstrate their ability to formulate and implement financial strategies, evaluate financial performance, and communicate financial information effectively. F3 exam is challenging but rewarding, and passing it demonstrates a high level of knowledge and skill in financial strategy and management.
NEW QUESTION # 290
AA is considering changing its capital structure. The following information is currently relevant to AA:
The gearing rating raising the new debt finance will be 50%.
Which THREE of the following statement about the impact of AA's change in capital structure are true under Modigliani and Miler's capital structure theory with tax.
Answer: A,D
NEW QUESTION # 291
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: A
NEW QUESTION # 292
The following information relates to Company A's current capital structure:
Company A is considering a change in the capital structure that will increase gearing to 30:70 (Debt:Equity).
The risk -free rate is 3% and the return on the market portfolio is expected to be 10%.
The rate of corporate tax is 25%
Using the Capital Asset Pricing Model, calculate the cost of equity resulting from the proposed change to the capital structure.
Answer: D
NEW QUESTION # 293
A listed company is financed by debt and equity.
If it increases the proportion of debt in its capital structure it would be in danger of breaching a debt covenant imposed by one of its lenders.
The following data is relevant:
The company now requires $800 million additional funding for a major expansion programme.
Which of the following is the most appropriate as a source of finance for this expansion programme?
Answer: C
Explanation:
In CIMA F3, when selecting an appropriate source of finance, you match the type and maturity of finance to the purpose of the funds, and you must also respect any constraints such as debt covenants and target gearing.
Here the company "is financed by debt and equity" and is already close to breaching a debt covenant if it increases the proportion of debt. That immediately rules out additional long-term borrowing such as a private placement of a bond (B) and also makes a bank overdraft (D) inappropriate: an overdraft is short-term, potentially repayable on demand, and is still debt, so it worsens gearing and covenant pressure.
The project is a major expansion programme, so it requires long-term, stable capital. F3 material emphasises that for a listed company needing substantial equity finance, a rights issue is usually the preferred mechanism:
it raises new equity, does not increase financial risk, and allows existing shareholders to maintain their proportional ownership by taking up their rights.
"Retained earnings" (A) represent accumulated past profits already part of equity; they are not a mechanism for raising an immediate $800m of new cash for investment. Therefore, the most appropriate source of finance in this situation is a rights issue.
NEW QUESTION # 294
Three companies are quoted on the New York Stock Exchange. The following data applies:
Which of the following statements is TRUE?
Answer: C
Explanation:
Correct answer: D. Companies A and B have the same business risk
Business risk is measured by asset beta.
A and B both have asset beta = 1.16, so same business risk.
C has higher asset beta (1.20), so highest business risk.
NEW QUESTION # 295
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