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CIMA F3 Exam Syllabus Topics:

Section	Weight	Objectives
Topic 1: Financial Policy Decisions	15%	- Dividend and distribution policy 1. Practical considerations and constraints 2. Theories of dividend relevance - Strategic financial objectives and governance 1. Role of financial strategy in overall corporate strategy 2. Agency theory and stakeholder interests
Topic 2: Sources of Long-Term Finance	25%	- Equity finance 1. Types of equity and issue methods 2. Cost of equity and capital structure theories - Optimal capital structure 1. Practical determinants of capital structure 2. Impact of gearing on risk and return - Debt and hybrid finance 1. Leasing, convertibles, and warrants 2. Types of debt, terms, and covenants
Topic 3: Financial Risk Management	15%	- Types and sources of financial risk 1. Credit and liquidity risk 2. Interest rate, foreign exchange, commodity risk - Risk measurement and assessment 1. Value-at-Risk, duration, gap analysis - Risk mitigation and hedging strategies 1. Internal controls and risk policy frameworks 2. Use of derivatives: forwards, futures, swaps, options
Topic 4: Business Valuation	20%	- Pricing and negotiation 1. Determining offer price and terms 2. Post-transaction value creation - Valuation methods 1. Relative valuation and market multiples 2. Asset-based, earnings-based, cash flow-based - Valuation concepts and purposes 1. Valuation for listing or equity issuance 2. Valuation for mergers, acquisitions, and disposals
Topic 5: Investment Appraisal and Decisions	25%	- Advanced investment appraisal techniques 1. Discounted cash flow, NPV, IRR, MIRR 2. Adjusted present value and real options - Risk analysis in investment decisions 1. Cost of capital estimation and adjustment 2. Sensitivity, scenario, and simulation analysis

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CIMA F3 Financial Strategy Sample Questions (Q99-Q104):

NEW QUESTION # 99
A company's annual dividend has grown steadily at an annual rate of 3% for many years. It has a cost of equity of 11%. The share price is presently $64.38.
The company is about to announce its latest dividend, which is expected to be $5.00 per share.
The Board of Directors is considering an attractive investment opportunity that would have to be funded by reducing the dividend to $4.50 per share. The board expects the project to enable future dividends to grow by
5% every year and the cost of equity to remain unchanged.
Calculate the change in share price, assuming that the directors announce their intention to proceed with this investment opportunity.
Give your answer to 2 decimal places.

Answer:

Explanation:
$ ?
14.37

NEW QUESTION # 100
A company plans a four-year project which will be financed by either an operating lease or a bank loan.
Lease details:
* Four year lease contract.
* Annual lease rentals of $45,000, paid in advance on the 1st day of the year.
Other information:
* The interest rate payable on the bank borrowing is 10%.
* The capital cost of the project is $200,000 which would have to be paid at the beginning of the first year.
* A salvage or residual value of $100,000 is estimated at the end of the project's life.
* Purchased assets attract straight line tax depreciation allowances.
* Corporate income tax is 20% and is payable at the end of the year following the year to which it relates.
A lease-or-buy appraisal is shown below:
Which THREE of the following items are errors within the appraisal?

A. Lease payments are timed incorrectly
B. Using the 10% discount rate is incorrect
C. Tax relief on lease payments have not been lagged correctly
D. The bank loan repayments should be included
E. The salvage value has been included within the lease option
F. The project's operating cashflows should be included

Answer: B,C,E

NEW QUESTION # 101
A national rail operating company has made an offer to acquire a smaller competitor.
Which of the following pieces of information would be of most concern to the competition authorities?

A. After the acquisition, the board proposes to withdraw some of the less profitable services.
B. The acquisition is likely to result in significant redundancies of staff currently working for the smaller rail operator.
C. The board informed a major institutional shareholder about the proposed acquisition before informing other shareholders.
D. After the acquisition, the board proposes to increase prices on some routes not serviced by other rail operators.

Answer: D

Explanation:
Competition authorities focus on market power and the potential for abuse of a dominant position.
A is most concerning: raising prices on routes where there are no competing operators suggests the merged entity could exploit monopoly power.
B, C and D relate more to service rationalisation, disclosure/insider issues, and employment, which are not the core focus of competition law.

NEW QUESTION # 102
A listed company plans to raise $350 million to finance a major expansion programme.
The cash flow projections for the programme are subject to considerable variability.
Brief details of the programme have been public knowledge for a few weeks.
The directors are considering two financing options, either a rights issue at a 20% discount to current share price or a long term bond.
The following data is relevant:
The company's share price has fallen by 5% over the past 3 months compared with a fall in the market of
3% over the same period.
The directors favour the bond option.
However, the Chief Accountant has provided arguments for a rights issue.
Which TWO of the following arguments in favour of a right issue are correct?

A. The WACC will decrease assuming Modigliani and Miller's Theory of Capital Structure without taxes applies.
B. The issue of bonds might limit the availability of debt finance in the future.
C. The rights issue will lead to less pressure on the operating cash flows of the programme.
D. The administrative costs of a rights issue will be lower.
E. The recent fall in the share price makes a rights issue more attractive to the company.

Answer: B,C

NEW QUESTION # 103
HHH Company has a fixed rate loan at 10.0%, but wishes to swap to variable. It can borrow at the risk-free rate +8%. The bank is currently quoting swap rates of 3.1% (bid) and 3.5% (ask). What net rate will HHH Company pay if it enters into the swap?

A. Risk-free rate +8%
B. Risk-free rate +6.5%
C. Risk-free rate +6.9%
D. Risk-free rate+3.1%

Answer: D

NEW QUESTION # 104
......

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