Free CIMA F3 Practice Exam with Questions & Answers | Set: 12

Which THREE of the following would be most important if a hospital wishes to review the effectiveness of its services?

VVV has a floating rate loan that it wishes to replace with a fixed rate. The cost of the existing loan is the risk-free rate + 3%. VW would have to pay a fixed rate of 7% on a fixed rate loan VVVs bank has found a potential counterparty for a swap arrangement.

The counterparty wishes to raise a variable rate loan It would pay the risk-free rate +1 % on a variable rate loan and 8% on a fixed rate.

The bank will require 10% of the savings from the swap and WV and the counterparty will share the remaining saving equally.

Calculate VWs effective rate of interest from this swap arrangement.

Company XXY operates in country X with the X$ as its currency. It is looking to acquire company ZZY which operates in country Z with the Z$ as its currency.

The assistant accountant at Company XXY has started to prepare an initial valuation of Company ZZY's equity for the first 3 years, however their valuation is incomplete. TBC' in the table below indicates that her calculations have yet to be completed.

The following information is relevant:

What is the correct figure (to the nearest million S) to include in year 3 as the present value in X$ million?

A company wishes to raise additional debt finance and is assessing the impact this will have on key ratios. 

The following data currently applies:

   • Profit before interest and tax for the current year is $500,000

   • Long term debt of $300,000 at a fixed interest rate of 5%

   • 250,000 shares in issue with a share price of $8

The company plans to borrow an additional $200,000 on the first day of the year to invest in new project which will improve annual profit before interest and tax by $24,000.

The additional debt would carry an interest rate of 3%.

Assume the number of shares in issue remain constant but the share price will increase to $8.50 after the investment.

The rate of corporate income tax is 30%.

After the investment, which of the following statements is correct?

An entity prepares financial statements to 31 December each year.  The following data applies:

1 December 20X0

   • The entity purchased some inventory for $400,000.

   • In order to protect the inventory against adverse changes in fair value the entity entered into a futures contract to sell the inventory for a fixed price on 31 January 20X1.

   • The entity designated this contract as a fair value hedge of the value of the inventory.

31 December 20X0

   • The inventory had a fair value of $480,000 and the futures contract had a fair value of $75,000 (a financial liability).

What will be the impact on the statement of profit or loss and other comprehensive income for the year ended 31 December 20X0 in respect of the change in the value of the inventory and the futures contract?

A company has in a 5% corporate bond in issue on which there are two loan covenants.

   • Interest cover must not fall below 3 times

   • Retained earnings for the year must not fall below $3.5 million

The Company has 200 million shares in issue.

The most recent dividend per share was $0.04.

The Company intends increasing dividends by 10% next year.

Financial projections for next year are as follows:

Advise the Board of Directors which of the following will be the status of compliance with the loan covenants next year?

A company's main objective is to achieve an average growth in dividends of 10% a year. 

In the most recent financial year:

Sales are expected to grow at 8% a year over the next 5 years. 

Costs are expected to grow at 5% a year over the next 5 years. 

What is the minimum dividend payout ratio in 5 years' time that would allow the company to achieve its objective?

A company is planning a new share issue.

The funds raised will be used to repay debt on which it is currently paying a high interest rate.

Operating profit and dividends are expected to remain unchanged in the near future.

If the share issue is implemented, which THREE of the following are most likely to increase?

Company S is planning to acquire Company T.

The shareholders in Company T will receive new shares in Company S in an all-share consideration.

Relevant information:

The shareholders in Company T want sufficient shares to receive a 25% premium on the pre-acquisition value of their shares, based on the pre-acquisition share price.

Which of the following share-for-share offers will achieve the desired result?

A company is considering either directly exporting its product to customers in a foreign country or setting up a subsidiary in the foreign country to manufacture and supply customers in that country.

Details of each alternative method of supplying the foreign market are as follows:

There is an import tax on product entering the foreign country of 10% of sales value.

This import duty is a tax-allowable deduction in the company's domestic country.

The exchange rate is A$1.00 = B$1.10

Which alternative yields the highest total profit after taxation?