Pass the CIMA Strategic F3 Questions and answers with ExamsMirror

Using the CAPM, the expected return for a company is 10%. The market return is 7% and the risk free rate is 1%.

 What does the beta factor used in this calculation indicate about the risk of the company?

Which THREE of the following remain unchanged over the life of a 10 year fixed rate bond?

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

A company's Board of Directors is considering raising a long-term bank loan incorporating a number of covenants.

The Board members are unsure what loan covenants involve. 

Which THREE of the following statements regarding loan covenants are true?

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

The corporate tax rate in country T is 20% and 25% tax depreciation allowances are available

Which TIIRCC of the following would be considered advantages of establishing a subsidiary in country T?

A listed company plans to raise new capital which will be required for future investment projects. The company has a gearing ratio of 50%, which is just below the company's target ratio.

The directors are comparing the benefits and drawbacks of each of the following two alternative sources of finance;

• Unsecured bank borrowings.

• Convertible bonds.

Which of the following statements is correct?

A venture capitalist invests in a company by means of buying:

   • 9 million shares for $2 a share and

   • 8% bonds with a nominal value of $2 million, repayable at par in 3 years' time. 

The venture capitalist expects a return on the equity portion of the investment of at least 20% a year on a compound basis over the first 3 years of the investment.

The company has 10 million shares in issue.

What is the minimum total equity value for the company in 3 years' time required to satisify the venture capitalist's expected return?

Give your answer to the nearest $ million.

$   million.   

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

Company A is identical in all operating and risk characteristics to Company B, but their capital structures differ.

Company B is all-equity financed. Its cost of equity is 17%.

Company A has a gearing ratio (debt:equity) of 1:2. Its pre-tax cost of debt is 7%. 

Company A and Company B both pay corporate income tax at 30%.

What is the cost of equity for Company A?

Extracts from a company's profit forecast for the next financial year as follows:

Since preparing the forecast, the company has decided to return surplus cash to shareholders by a share repurchase arrangement.

The share repurchase would result in the company purchasing 20% of the 1,250 million ordinary shares currently in issue and canceling them.

Assuming the share repurchase went ahead, the impact on the company's forecast earnings per share will be an increase of: