Free CIMA F3 Practice Exam with Questions & Answers

B, a European based modern art dealer, frequently imports and sells single high value items created in the United States. The price is fixed at the date of sale but the items are commissioned and made to order with a lead time of three to nine months depending on the individual specification

B holds payment for his customers from the point of purchase and passes funds when the items are shipped However, despite putting the money on short term deposit, there have been times when B's profits have been almost entirely eroded by adverse movements m interest rates Advise B by matching the appropriate instrument to B's requirements.

Company A has just announced a takeover bid for Company B. The two companies are large companies in the same industry_ The bid is considered to be hostile.

Company B's Board of Directors intends to try to prevent the takeover as they do not consider it to be in the best interests of shareholders

Which THREE of the following are considered to be legitimate post-offer defences?

A large, listed company in the food and household goods industry needs to raise $50 million for a period of up to 6 months.

It has an excellent credit rating and there is almost no risk of the company defaulting on the borrowings. The company already has a commercial paper programme in place and has a good relationship with its bank.

Which of the following is likely to be the most cost effective method of borrowing the money?

On 31 October 20X3:

   • A company expected to agree a foreign currency transaction in January 20X4 for settlement on 31 March 20X4.  

   • The company hedged the currency risk using a forward contract at nil cost for settlement on 31 March 20X4.

   • The transaction was correctly treated as a cash flow hedge in accordance with IAS 39 Financial Instruments: Recognition and Measurement.

On 31 December 20X3, the financial year end, the fair value of the forward contract was $10,000 (asset).

How should the increase in the fair value of the forward contract be treated within the financial statements for the year ended 31 December 20X3?

Company M's current profit before interest and taxation is $5.0 million.

It has a long-term 10% corporate bond in issue with a nominal value of $10 million.

The rate of corporate tax is 25%.

It plans to continue to pay out 50% of its earnings in dividends and earnings are expected to grow by 3% each year in perpetuity.

Its cost of equity is 10%.

Using the dividend growth model, advise the Board of Directors of Company M which of the following provide a reasonable valuation of Company M's equity?

KKL is a listed sports clothing company with three separate business units. KKL is seeking to sell TT’, one of these business units

TTP cwns a new. brand of trail running shoes that have Droved hugely popular with lone distance runners. The management team of TTP are frustrated by the constraints imposes b/ KKL in managing tie brand and developing. the bus ness and they believe that TTF has huge growth potential.

The management team of TTP have approached KKL with a proposal to purchase 1~P through a management layout (MDO). KKL has accepted this proposal as TTP has not proved to be a good fit' with the rest of the business and has agreed on the selling price.

Which THREE of the following factors a-e mast Likely to affect the success of the MBO?

A company needs to raise $20 million to finance a project.

It has decided on a rights issue at a discount of 20% to its current market share price.

There are currently 20 million shares in issue with a nominal value of $1 and a market price of $5 per share.

Calculate the terms of the rights issue.

A company has accumulated a significant amount of excess cash which is not required for investment for the foreseeable future.

It is currently on deposit, earning negligible returns.

The Board of Directors is considering returning this excess cash to shareholders using a share repurchase programme.

The majority of shareholders are individuals with small shareholdings.

Which THREE of the following are advantages of the company undertaking a share repurchase programme? 

Company AAB is located in Country A with the A$ as its functional currency It plans to grow by acquisition and has identified Company BBA as a potential takeover candidate Company BBA is located in Country B with the BS as its functional currency.

The directors of Company AAB are concerned about foreign currency risk if the acquisition goes ahead

Which of the following will be most effective in reducing Company AAB's exposure to translation risk if the acquisition is successful1?

The competition authorities are investigating the takeover of Company Z by a larger company, Company Y.

Both companies are food retailers. 

The takeover terms involve using a part cash, part share exchange means of payment.

Company Z is resisting the bid, arguing that it undervalues its business, while lobbying extensively among politicians to sway public opinion against the bidder.

Which of the following actions by Company Y is most likely to persuade the competition authorities to approve the acquisition?