Free CIMA F3 Practice Exam with Questions & Answers | Set: 13

Company A is planning to acquire Company B at a price of $ 65 million by means of a cash bid.

Company A is confident that the merged entity can achieve the same price earnings ratio as that of Company A.

What does Company A expect the value of the merged entity to be post acquisition?   

Which THREE of the following statements about stock market listings are correct?

Company AB was established 6 years ago by two individuals who each own 50% of the shares.

Each individual heads a separate division within the company, which now has annual turnover of GBP10 million and employs 40 people.

Some of the employees are very highly paid as they are important contributors to the company's profitability.

The owners of the company wish to realise the full value of their investment within the next 12 months.

Which TWO of the following options are most likely to be acceptable exit strategies to the two owners of the company?

A venture capitalist has made an equity investment in a private company and is evaluating possible methods by which it can exit the investment over the next 3 years. The private company shareholders comprise the four original founders and the venture capitalist. 

 Advise the venture capitalist which THREE of the following methods will enable it to exit its equity investment?

The directors of the following four entities have been discussing dividend policy:

Which of these four entities is most likely to have a residual dividend policy?

Company W has received an unwelcome takeover bid from Company B. The offer is a share exchange of 3 shares in Company B for 5 shares in Company Wora cash alternative of $5.70 for each Company W share.

Company B is approximately twice the size of Company W based on market capitalisation. Although the two companies have some common business interested the main aim of the bid is diversification for Company B.

Company W has substantial cash balances which the directors were planning to use to fund an acquisition. These plans have not been announced to the market.

The following share price information is relevant.

Which of the following would be the most appropriate action by Company W's directors following receipt of this hostile bid?

The International Integrated Reporting Council (IIRC) was formed in August 2010 and brings together a cross-section of representatives from a wide variety of business sectors.

The primary purpose of the IIRC's framework is to help enable an organsation to communicate how it:

A company is considering hedging the interest rate risk on a 3-year floating rate borrowing linked to the 12-month risk-free rate.

If the 12-month risk-free rate for the next three years is 2%, 3% and 4%, which of the following alternatives would result in the lowest average finance cost for the company over the three years?

A company with 4 million shares in issue wishes to raise $4 million by means of a rights issue

The share price prior to the rights issue is $5.00.

Under the rights issue, 1 million new shares will be issued at $4.00.

When the rights issue is announced it is expected that the Theoretical Ex-rights Price (TERP) will be $4.80

The directors of the company are considering offering any shareholder who does not wish to take up the rights the opportunity to sell the rights back to the company for $1.00.

Which of the following is the most likely consequence of the directors offer?

A company is considering either exporting its product directly to customers in a foreign country or establishing a manufacturing subsidiary in that country.

The corporate tax rate in the company's own country is 20% and 25% tax depreciation allowances are available.

Which THREE of the following would be considered advantages of establishing the subsidiary in the foreign country?