Free CIMA F3 Practice Exam with Questions & Answers | Set: 6

A venture capitalist is most likely to take which THREE of the following exit routes?

Companies L. M N and O:

• are based in a country that uses the RS as its currency

• have an objective to grow operating profit year on year

• have the same total levels of revenue and cost

• trade with companies or individuals in the United States. All import and export trade with companies or individuals in the United States is priced in US$.

Typical import/export trade for each company in a year are as follows:

Which company's growth objective is most sensitive to a movement in the USS / RS exchange rate?

Select the most appropriate divided for each of the following statements:

An entity prepares financial statements to 30 June.

During the year ended 30 June 20X2 the following events occurred:

1 July 20X1

   • The entitiy borrowed $100 million at a variable rate of interest.

   • In order to protect itself against the variability of its interest cashflows, the entity entered into a pay-fixed-receive-variable interest swap with annual settlements.  The fair value of the swap on this date was zero.

30 June 20X2

   • The entity received a net settlement of $2 million under the swap. After this net settlement, the fair value of the swap was $5 million - a financial asset.

The entity decides to use hedge accounting for this arrangement and has designated it as a cash flow hedge.  The swap is a perfect hedge of the variability of the cash interest payments.

Which of the following describes the treatment of the settlement and the change in the fair value of the swap in the statement of profit or loss and other comprehensive income for the year ended 30 June 20X2?

Three companies are quoted on the New York Stock Exchange. The following data applies:

Which of the following statements is TRUE?

A company generates and distributes electricity and gas to households and businesses. 

Forecast results for the next financial year are as follows:

The Industry Regulator has announced a new price cap of $1.50 per Kilowatt. 

The company expects this to cause consumption to rise by 10% but costs would remained unaltered. 

The price cap is expected to cause the company's net profit to fall to:

The Board of Directors of a small listed company engaged in exploration are currently considering the future dividend policy of the company. Exploration is considered a high-risk business and consequently the company has a low level of debt finance.

Forecasts indicate a period of profit fluctuation in the next few years as the company is planning to embark on a major capital investment project. Debt finance is unlikely to be available due to the project's high business risk.

Which THREE of the following are practical considerations when determining the company's dividend/retention policy? 

A company is concerned that a high proportion of its debt portfolio consists of variable rate finance with an interest rate of LIBOR ' 1 .0%.

It is considering using an interest rate swap to reduce interest rate risk out is concerned about additional finance cost this might create.

A bank has quoted swap rates of 3% 3.5% against LIBOR.

A bank has quoted swap rates of 3% 3.5% against LIBOR.

Is an interest rate swap likely to be beneficial to the company at current LIBOR rates?

A company is considering whether to lease or buy an asset.

The following data applies:

   • The bank will charge interest at 7.14% per annum

   • The asset will cost $1 million

   • Tax-allowable depreciation is available on a straight line basis over 5 years

   • There is no residual value

   • Corporate tax is paid at 30% in the year when the profit is earned

What is the NPV of the buy option?

Give your answer to the nearest $000.

$ ?  

The directors of a unlisted manufacturing company have prepared a valuation of their company using the price-earning method.

Their calculation is:

Value if the company‘s equity = $6 million x 10 =$60 million where.

• $6 million is the company’s reported profit before interested and tax in the most recent accounting period and
• 10 is the average price-earnings ratio for all listed companies

Which THREE of the following are weakness of this valuation?