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| Certification Vendor: | CIMA (Chartered Institute of Management Accountants) |
|---|---|
| Exam Name: | Financial Strategy |
| Exam Number: | F3 |
| Real Exam Qty: | 60 |
| Passing Score: | 100 (Scaled score out of 150, approx. 67%) |
| Available Languages: | English |
| Exam Format: | Drag-and-Drop, Multiple Response, Multiple Choice, Number Entry |
| Exam Price: | £115 (Strategic Level Objective Test fee) |
| Certificate Validity Period: | N/A (Subject to annual subscription) |
| Exam Duration: | 90 minutes |
| Related Certifications: | CGMA (Chartered Global Management Accountant) CIMA Professional Qualification |
| Sample Questions: | CIMA F3 Sample Questions |
| Exam Way: | Computer-based (On demand at Pearson VUE test centres or Online) |
| Pre Condition: | Completion of Management Level (E2, P2, F2 plus Management Case Study) |
| Official Syllabus URL: | https://www.astranti.com/cima/strategic/objectivetests/syllabus/f3 |
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CIMA F3: Financial Strategy is a professional level exam designed to test a student’s knowledge and understanding of key concepts surrounding financial strategy in modern organizations. F3 exam is part of the Chartered Institute of Management Accountants (CIMA) syllabus and is critical for students who want to work in the financial management sector. It is also necessary for individuals who want to move up the ranks in their current organizations.
The Chartered Institute of Management Accountants (CIMA) F3 Exam is focused on financial strategy. It is one of the core exams in the CIMA professional qualification and is essential for anyone who wants to pursue a career in management accounting or financial management. F3 exam assesses the candidate's understanding of the key principles of financial strategy, their ability to analyze financial information, and their skills in developing and implementing financial plans.
NEW QUESTION # 277
TTT pic is a listed company. The following information is relevant:
TTT pic's board is considering issuing new 6% irredeemable debt to re-purchase equity. This is expected to change TTT pic's debt to equity mix to 40: 60 by market value. The corporate tax rate is 20%.
What will be TTT pic's WACC following this change in capital structure?
Answer: D
Explanation:
Step 1 - Work out current gearing
Current values:
Equity = $80m
Debt = $20m
Total value VVV = 80 + 20 = $100m
So:
DE=2080=0.25\frac{D}{E} = \frac{20}{80} = 0.25ED=8020=0.25
Tax rate T=20%T = 20\%T=20% # after-tax cost of debt:
Kd(1#T)=6%(1#0.2)=4.8%K_d(1-T) = 6\%(1-0.2) = 4.8\%Kd(1#T)=6%(1#0.2)=4.8% Given cost of equity Ke=14%K_e = 14\%Ke=14%.
Step 2 - Find the ungeared (asset) cost of capital KuK_uKu
Use Modigliani-Miller with tax for equity:
Ke=Ku+(Ku#Kd)(1#T)DEK_e = K_u + (K_u - K_d)(1-T)\frac{D}{E}Ke=Ku+(Ku#Kd)(1#T)ED Substitute:
14=Ku+(Ku#6)×0.8×0.2514 = K_u + (K_u - 6)\times 0.8 \times 0.2514=Ku+(Ku#6)×0.8×0.25 14=Ku+0.2 (Ku#6)14 = K_u + 0.2(K_u - 6)14=Ku+0.2(Ku#6) 14=1.2Ku#1.214 = 1.2K_u - 1.214=1.2Ku#1.2 1.2Ku=15.
2#Ku#12.67%1.2K_u = 15.2 \Rightarrow K_u \approx 12.67\%1.2Ku=15.2#Ku#12.67% Step 3 - Re-gear the cost of equity for the new structure New target mix: Debt : Equity = 40 : 60 # DE=4060=0.6667\frac{D}{E} = \frac{40}{60} = 0.6667ED=6040=0.6667 Reapply MM with tax:
Ke#=Ku+(Ku#Kd)(1#T)DEK_e' = K_u + (K_u - K_d)(1-T)\frac{D}{E}Ke#=Ku+(Ku#Kd)(1#T)ED Ke#=12.
67+(12.67#6)×0.8×0.6667K_e' = 12.67 + (12.67 - 6)\times 0.8 \times 0.6667Ke#=12.67+(12.67#6)×0.8×0.
6667 Ke##12.67+3.56=16.23%K_e' \approx 12.67 + 3.56 = 16.23\%Ke##12.67+3.56=16.23% Step 4 - Calculate new WACC New proportions:
E/V=60100=0.6,D/V=40100=0.4E/V = \frac{60}{100} = 0.6,\quad D/V = \frac{40}{100} = 0.4E
/V=10060=0.6,D/V=10040=0.4 WACC#=0.6×16.23%+0.4×4.8%\text{WACC}' = 0.6 \times 16.23\% + 0.4
\times 4.8\%WACC#=0.6×16.23%+0.4×4.8% WACC##9.74%+1.92%=11.66%\text{WACC}' \approx 9.74
\% + 1.92\% = 11.66\%WACC##9.74%+1.92%=11.66%
NEW QUESTION # 278
A venture capitalist invests in a company by means of buying:
* 9 million shares for $2 a share and
* 8% bonds with a nominal value of $2 million, repayable at par in 3 years' time.
The venture capitalist expects a return on the equity portion of the investment of at least 20% a year on a compound basis over the first 3 years of the investment.
The company has 10 million shares in issue.
What is the minimum total equity value for the company in 3 years' time required to satisify the venture capitalist's expected return?
Give your answer to the nearest $ million.
$ million.
Answer: B
NEW QUESTION # 279
Company X plans to acquire Company Y.
Pre-acquisition information:
Post-acquisition information:
Total combined earnings are expected to increase by 10%
Total combined P/E multiple will remain at 10 times
Which of the following share-for-share exchanges will result in an increase of 10% in Company X's share price post-acquisition?
Answer: D
NEW QUESTION # 280
CI IJ has decided to move its production plant to overseas country X.
This would make the product cheaper to produce. The technology used to make the product is very advanced and some of the skilled staff would have to move to country X.
The Production Director has identified that there are some political risks in moving to county X.
For each of the political risks of moving to country X shown below, select the correct method for reducing the risk.
Answer:
Explanation:
NEW QUESTION # 281
The Board of Directors of a listed company have decided that it needs to increase its equity capital to ensure it is in a more stable financial position.
The shareholder profile is a mix of institutional and individual small shareholders.
The board is considering either:
* A scrip dividend
* A zero dividend
Which THREE of the following would be considered disadvantages of a scrip dividend compared to a zero dividend?
Answer: B,D,E
NEW QUESTION # 282
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