Free CIMA F3 Practice Exam with Questions & Answers | Set: 2

Which TWO of the following situations offer arbitrage opportunities?

A)

B)

C)

D)

Company R is a major food retailer.  It wishes to acquire Company S, a food manufacturer.

Company S currently supplies many stores owned by Company R with food products that it manufactures.

Company S is of similar size to Company R but has a lower credit rating.

Which of the following is most likely to be a synergistic benefit to R on purchasing S?

A wholly equity financed company has the following objectives:

1. Increase in profit before interest and tax by at least 10% per year.

2. Maintain a dividend payout ratio of 40% of earnings per year.

Relevant data:

   • There are 2 million shares in issue.

   • Profit before interest and tax in the last financial year was $4 million.

   • The corporate income tax rate is 20%.

At the beginning of the current financial year, the company raised long term debt of $2 million at 5% interest each year. 

Calculate the dividend per share that will be announced this year assuming the company achieves its objective of increasing profit before interest and tax by 10%.

NNN is a company financed by both equity and debt. The directors of NNN wish to calculate a valuation of the company's equity and at a recent board meeting discussed various methods of business valuation.

Which THREE of the following are appropriate methods for the directors of NNN to use in this instance?

Company ABE is an unlisted company that has been trading for 10 years. During this period, it has seen substantial growth in revenue and earnings. For the company to continue its growth it needs to raise new finance The directors are considering an initial public offering (IPO).

The following information is relevant to Company ABE:

A listed company of similar size and in the same industry as Company ABE had earnings per share in the last financial year of $1 80 Its shares are currently trading at a price / earnings ratio of 12.

The directors of Company ABE have asked for advice on what price they might expect if the company is listed on the stock exchange by means of an IPO.

Using the information provided what is an estimated issue price for each share in Company ABE?

Give your answer to 2 decimal places.

Company J is in negotiations to acquire Company K and believes it can turn around Company K's performance to match its own.

The following information is available for the two companies:

Select the maximum price for each share that Company J should place on Company K during negotiations. 

A product costs USD10 when purchased in the USA. The same product costs USD12 when it is purchased in the UK and the price in GBP is convened to USD.

Which of the following statement concerning purchasing power parity is correct?

RR has agreed to sell goods to XX for S20.000 XX will pay when the goods are delivered in 6 months time. RR's home currency is the £- The current exchange rate is 4.3 £/S. The projected inflation rate for the S is 2.8%, and for the E 4 6%.

When RR receives payment for its goods, what will the value be to the nearest pound?

Which THREE of the following non-financial objectives would be most appropriate for a listed company in the food retailing industry?

Which of the following would be a reason for a company to adopt a low dividend pay-out policy?