Pass the CIMA Strategic F3 Questions and answers with ExamsMirror

A company has a 4% corporate bond in issue on which there are two loan covenants.

• Interest cover must not fall below 4 times

• Retained earnings for the year must not fall below S5 00 million

The Company has 100 million shares in issue. The most recent dividend per share was $0 10 The Company intends increasing dividends by 8% next year.

Financial projections tor 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?

Company A is subject to a takeover bid from Company B, both companies operate in the same industry and each of them demand a significant market share Company B h3S made an of an of $5 per share to the shareholders of Company A.

The directors of Company A do not believe the takeover would be in the best interests of the stakeholders and other stakeholders of Company A due to the following reruns

1. Company B has recently taken ever several ether companies resulting in them breaking up the company and se ling on the assets.

2 The directors of Company A believe the offer of $5 per snare undervalues tie company

The directors of Company A are therefore keen to prevent the bid from going ahead

Which THREE of the following defence strategies could be used by the directors of Company Air this situation?

Which THREE of the following statements are disadvantages of the net asset basis of valuation?

Company MB is in negotiations to acquire the entire share capital of Company BBA. Information about each company is as follows:

It is expected that Company BBA's profit before interest and tax will be $30 million in each of the two years after acquisition. Company AAB is considering how best to structure the offer Company AAB's discount factor and appropriate cost of equity for use in valuing Company BBA is 10%

Shareholders taxation implications should be ignored

Which of the following provides the shareholders of Company BBA with the highest offer price?

A company has:

   • $6 million market value of equity

   • $4 million market value of debt 

   • WACC of 11.04%

   • Corporate income tax rate of 20%

According to Modigliani and Miller's theory of capital structure with tax, what is the ungeared cost of equity?

A private company was formed five years ago and is currently owned and managed by its five founders. The founders, who each own the same number of shares have generally co-operated effectively but there have also been a number of areas where they have disagreed

The company has grown significantly over this period by re-investing its earnings into new investments which have produced excellent returns

The founders are now considering an Initial Public Offering by listing 70% of the shares on the local stock exchange

Which THREE of the following statements about the advantages of a listing are valid?

Which THREE of the following are benefits of integrated reporting?

A listed company has recently announced a profit warning.

The company's share price fell 20% on the day of the announcement but had been fairly static in the weeks leading up to the announcement.

Which form of efficient market is most likely to be indicated by this share price movement?

A listed company in a high technology industry has decided to value its intellectual capital using the Calculated Intangible Value method (CIV).

Relevant data for the company:

   • Pays corporate income tax at 30%

   • Cost of equity is 9%, pre-tax cost of debt is 7% and the WACC is 8%

   • The value spread has been calculated as $26 million

Calculate the CIV for the company.

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?