Prepare CIMAPRA19-F03-1 Question Answers Free Update With 100% Exam Passing Guarantee [2026]
Dumps Real CIMA CIMAPRA19-F03-1 Exam Questions [Updated 2026]
To prepare for the CIMA CIMAPRA19-F03-1 exam, candidates must have a strong foundation in financial strategy. Candidates should have a good understanding of financial analysis and planning, as well as risk management and investment appraisal. Candidates should also have a good understanding of financial reporting and analysis.
NEW QUESTION # 217
A listed company plans to raise $350 million to finance a major expansion programme.
The cash flow projections for the programme are subject to considerable variability.
Brief details of the programme have been public knowledge for a few weeks.
The directors are considering two financing options, either a rights issue at a 20% discount to current share price or a long term bond.
The following data is relevant:
The company's share price has fallen by 5% over the past 3 months compared with a fall in the market of 3% over the same period.
The directors favour the bond option.
However, the Chief Accountant has provided arguments for a rights issue.
Which TWO of the following arguments in favour of a right issue are correct?
- A. The WACC will decrease assuming Modigliani and Miller's Theory of Capital Structure without taxes applies.
- B. The administrative costs of a rights issue will be lower.
- C. The recent fall in the share price makes a rights issue more attractive to the company.
- D. The issue of bonds might limit the availability of debt finance in the future.
- E. The rights issue will lead to less pressure on the operating cash flows of the programme.
Answer: D,E
NEW QUESTION # 218
Company R is a well-established, unlisted, road freight company.
In recent years R has come under pressure to improve its customer service and has had some cusses in doing this However, the cost of improved service levels has resulted In it marketing small losses in its latest financial year. This is the forest time R has not been profitable.
R uses a' residual divided policy ad has paid dividends twice in the last 10 years.
Which of the following methods would be most appropriate for valuating R?
- A. The divided valuation mode.
- B. Valuing the tangible assets and intangible assets of R.
- C. The earnings yield method, adjusting the earnings yield of a listed company downloads to reflect R's unlisted status.
- D. The P/E method, adjusting the P/E of a listed company downwards to reflect R's unlisted status.
Answer: A
Explanation:
Most suitable valuation method for an unlisted company that has only recently made a (small) loss and has very irregular dividends is an earnings-based multiple using comparables, not a dividend model or pure asset valuation.
NEW QUESTION # 219
A listed company follows a policy of paying a constant dividend. The following information is available:
* Issued share capital (nominal value $0.50) $60 million
* Current market capitalisation $480 million
The shareholders are requesting an increased dividend this year as earnings have been growing. However, the directors wish to retain as much cash as possible to fund new investments. They therefore plan to announce a
1-for-10 scrip dividend to replace the usual cash dividend.
Assuming no other influence on share price, what is the expected share price following the scrip dividend?
Give your answer to 2 decimal places.
$ ?
Answer:
Explanation:
3.64, 3.63, 3.65
NEW QUESTION # 220
A company intends to sell one of its business units, Company R by a management buyout (MBO).
A selling price of $100 million has been agreed.
The managers are discussing with a bank and a venture capital company (VCC) the following financing proposal:
The VCC requires a minimum return on its equity investment in the MBO of 30% a year on a compound basis over 5 years.
What is the minimum TOTAL equity value of Company R in 5 years time in order to meet the VCC's required return?
Give your answer to one decimal place.
$ ? million
Answer:
Explanation:
111.4, 111,
111.0, 111.1, 111.2,
111.3, 111.5, 111.6,
111.7
NEW QUESTION # 221
A listed company is planning a share repurchase.
Research into different offer prices has given the following data with regards acceptance by the shareholders at different prices:
What price should be offered to shareholders if the retained earnings of the company are to remain unchanged?
- A. $9.50
- B. $9.00
- C. $10.00
- D. $8.50
Answer: A
NEW QUESTION # 222
WX, an advertising agency, has just completed the all-cash acquisition of a competitor, YZ. This was seen by the market as a positive strategic move byWX.
Which THREE of the following will WX's shareholders expect the company's directors to prioritise following the acquisition?
- A. The regulatory approval required to complete the acquisition.
- B. The integration and retention of key employees of YZ.
- C. The development of a dividend policy to meet the expectations of the YZ's shareholders.
- D. The realisation of anticipated post-acquisition synergies.
- E. The retention of YZ's key customers.
Answer: A,B,D
NEW QUESTION # 223
Company Z has just completed the all-cash acquisition of Company A.
Both companies operate in the advertising industry.
The market considered the acquisition a positive strategic move by Company Z.
Which THREE of the following will the shareholders of Company Z expect the company's directors to prioritise following the acquisition?
- A. The development of a dividend policy to meet the expectations of the target company shareholders.
- B. The retention of key customers of the acquired company.
- C. The integration and retention of key employees.
- D. The regulatory approval required to complete the acquisition.
- E. The realisation of anticipated post-acquisition synergies.
Answer: B,C,E
NEW QUESTION # 224
A company is financed by debt and equity and pays corporate income tax at 20%.
Its main objective is the maximisation of shareholder wealth.
It needs to raise $200 million to undertake a project with a positive NPV of $10 million.
The company is considering three options:
* A rights issue.
* A bond issue.
* A combination of both at the current debt to equity ratio.
Estimations of the market values of debt and equity both before and after the adoption of the project have been calculated, based upon Modigliani and Miller's capital theory with tax, and are shown below:
Under Modigliani and Miller's capital theory with tax, what is the increase in shareholder wealth?
- A. $160 million if financed by a mixture of debt and equity
- B. $210 million if financed by equity
- C. $50 million if financed by debt
- D. $10 million irrespective of finance
Answer: C
NEW QUESTION # 225
A company wishes to raise new finance using a rights issue to invest in a new project offering an IRR of
10%
The following data applies:
* There are currently 1 million shares in issue at a current market value of $4 each.
* The terms of the rights issue will be $3.50 for 1 new share for 5 existing shares.
* The company's WACC is currently 8%.
What is the yield-adjusted theoretical ex-rights price (TERP)?
Give your answer to 2 decimal places.
$ ?
Answer:
Explanation:
4.06, 4.060
NEW QUESTION # 226
PYP is a listed courier company. It is looking to raise new finance to fit each of its delivery vans with new equipment to allow improved parcel tracking for customers The senior management team of PYP have decided on a 10-year secured bond to finance this investment-
Which TWO of the following variables are most likely to decrease the yield to maturity of the bond?
- A. The senior management team decide to issue an unsecured bond rather than a secured bond
- B. The senior management team decide to issue a convertible bond rather than a conventional bond
- C. The announcement of a new contract for PYP that will increase operating profits by 5% over the next 5 years.
- D. Changing the term of the bond from 1 0 years to 5 years to match the expected life of the new equipment
Answer: B,D
NEW QUESTION # 227
M is an accountant who wishes to take out a forward rate agreement as a hedging instrument but the company treasurer has advised that a short-term interest rate future would be a better option.
Which of the following is true of a short-term interest rate future?
- A. It can be tailored to the exact reeds of the company.
- B. It interest rates have gone down the price of the future will have fallen.
- C. It must be kept for ne whole duration of the contract
- D. The date is flexible and the position can be closed quickly and easily.
Answer: C
NEW QUESTION # 228
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.
Answer:
Explanation:
$25.20 per shareShares in issue = 50mRevenue = $650mPre-tax profit = $150mTax rate = 30%
Comparable listed company: EPS = $1.80, P/E = 12Earnings after taxEarnings=150×(1#0.30)=150×0.70=$105m\text
{Earnings} = 150 \times (1 - 0.30) = 150 \times 0.70 = \$105\text{m}Earnings=150×(1#0.30)=150×0.
70=$105m EPS for ABEEPS=105/50=$2.10\text{EPS} = 105 / 50 = \$2.10EPS=105/50=$2.10 Apply peer P
/E of 12Issue price#2.10×12=$25.20\text{Issue price} \approx 2.10 \times 12 = \$25.20Issue price#2.
10×12=$25.20 Estimated IPO issue price (to 2 d.p.): $25.20 per share
NEW QUESTION # 229
A company is financed as follows:
* 400 million $1 shares quoted at $3.00 each.
* $800 million 5% bonds quoted at par.
The company plans to raise $200 million long term debt to finance a project with a net present value of $100 million.
The bank that is providing the debt is insisting on a maximum gearing level covenant.
Gearing will be based on market values and calculated as debt/(debt + equity).
What is the lowest figure for the gearing covenant that the bank could impose without the company breaching the agreement?
- A. 46%
- B. 44%
- C. 43%
- D. 45%
Answer: B
NEW QUESTION # 230
A company is preparing an integrated report according to the International <IR> Framework as issued by the International Integrated Reporting Council.
Which THREE of the following should be included in the report?
- A. A summary of the key issues discussed by directors in main board meetings.
- B. The challenges and uncertainties that the organisation is likely to encounter in pursuing its strategy.
- C. A comparison of the key elements of its financial statements with those of its main competitor.
- D. An explanation of how the organisation's governance structure supports its ability to create value in the short, medium and long term.
- E. A detailed analysis of the organisation's business model.
Answer: B,D,E
Explanation:
Integrated reports under the <IR> Framework should include:
Governance and how it supports value creation # A
The organisation's business model # B
Risks, challenges, and uncertainties affecting strategy and value creation # C Comparisons with competitors' financials (D) and a summary of board meeting discussions (E) are not required content elements in the <IR> Framework.
NEW QUESTION # 231
Where a company acquires another company, which THREE of the following offer the greatest potential for enhancing shareholder wealth?
- A. Achieving more press coverage for the company
- B. Acquiring intellectual property assets
- C. Creating new opportunities for employees.
- D. Exploiting production synergies.
- E. Achieving greater cultural diversity
- F. Elimination of existing competition.
Answer: B,D,F
NEW QUESTION # 232
An unlisted company:
Is owned by the original founder and member of their families.
Is growing more rapidly than other companies in the same industry.
Pays a fixed annual divided
Which of the following methods would be the most appropriate to value this company's equity?
- A. Discounted cash flow analysis based on forecast future free cash flows.
- B. Asset based approach including intangibles.
- C. Divided valuation method.
- D. P/E ratio of a listed company in the same industry.
Answer: A
Explanation:
Because the company is unlisted, growing faster than the industry, and pays only a fixed dividend (not linked to performance), dividend or simple P/E methods won't capture its value properly. A DCF based on future free cash flows is most suitable.
NEW QUESTION # 233
An aerospace company is planning to diversify into car manufacturing.
Relevant data:
What is the the cost of equity to be used in the WACC for the project appraisal?
Give your answer in percentage, as a whole number.
Answer:
Explanation:
19%
NEW QUESTION # 234
XYZ has a variable rate loan of $200 million on which it is paying interest of Liber ' 3%.
XYZ entered into a swap with AG bank to convert this to a fixed rate 8% loan. AB bank charges an annual commission of 0.4% for making this arrangement Calculate the net payment from KYZ to AB bank at the end of the first year if Libor was 2% throughout the year.
Give your answer in $ million, to one decimal place.
Answer:
Explanation:
22.8
NEW QUESTION # 235
Company A is a large listed company, with a wide range of both institutional and private shareholders.
It is planning a takeover offer for Company B.
Company A has relatively low cash reserves and its gearing ratio of 40% is higher than most similar companies in its industry.
Which TWO of the following would be the most feasible ways of Company A structuring an offer for Company B?
- A. Debt for share exchange.
- B. Cash offer, funded from existing cash resources.
- C. Cash offer, funded by a rights issue.
- D. Cash offer, funded by borrowings.
- E. Share for share exchange.
Answer: C,E
NEW QUESTION # 236
X exports goods to customers in a number of small countries Asi
a. At present, X invoices customers in X's home currency.
The Sales Director has proposed that X should begin to invoice in the customers currency, and the Treasurers considering the implications of the proposal.
Which TWO of the following statement are correct?
- A. The overseas customers may have difficulty obtaining X's name currency with which to make the purchases, so the Sales Director's proposal may increase sales.
- B. If the proposal is adopted, X will have a lower effective sales price per unit due to exchange rate fluctuations.
- C. X may be able to sell the receipts forward.
- D. X will know advance the amount of home currency it will receive for the export sales.
- E. The customer will tear the foreign exchange risk and will only buy from X if they are prepared to accept this.
Answer: A,B
NEW QUESTION # 237
It is now 1 January 20X0.
Company V, a private equity company, is considering the acquisition of 40% of the equity of Company A for a total amount of $15 million.
Company A has been established to develop a new type of engine which will be launched at the end of 20X1.
Company A is forecasting that the new engine will result in free cash flows to equity of $2m in its first year of operation and that this will rise by 8% per year for the foreseeable future.
The new engine is the only commercial activity that Company A is involved in.
Company V intends to sell its stake in Company A when the new engine is launched.
Company A has a cost of equity of 12%.
Assuming that Company V receives an amount that reflects the present value of their shares in company A.
what is the estimated annual rate of return to Company V from this investment? (To the nearest %)
- A. 3%
- B. 10%
- C. 16%
- D. 33%
Answer: B
NEW QUESTION # 238
A company has a covenant on its 5% long term corporate bond.
* Covenant - The earnings must not fall below $7 million
The bond has a nominal value of $60 million.
It is currently trading at 80% of its nominal value.
The projected earnings before interest and taxation for next year are $11.5 million.
The company retains 80% of its earnings. It pays tax at 20%.
Advise the Board of Directors which of the following covenant conditions will apply next year?
- A. The earnings will be = $7.28 million (The covenant will not be breached).
- B. The earnings will be = $5.44 million (The covenant will be breached).
- C. The earnings will be = $11.50 million (The covenant will not be breached).
- D. The earnings will be = $6.80 million (The covenant will be breached).
Answer: D
Explanation:
Explanation with calculations:
Bond nominal value = $60m
Coupon = 5% # Interest = 0.05 × 60 = $3m
Projected EBIT = $11.5m
Profit before tax (PBT)
PBT=EBIT#Interest=11.5#3=8.5 million\text{PBT} = \text{EBIT} - \text{Interest} = 11.5 - 3 = 8.5\ \text
{million}PBT=EBIT#Interest=11.5#3=8.5 million
Tax (20%)
Tax=0.20×8.5=1.7 million\text{Tax} = 0.20 \times 8.5 = 1.7\ \text{million}Tax=0.20×8.5=1.7 million Earnings after tax (profit for the year) Earnings=8.5#1.7=6.8 million\text{Earnings} = 8.5 - 1.7 = 6.8\ \text{million}Earnings=8.5#1.7=6.8 million The covenant states that earnings must not fall below $7m. On the standard CIMA F3 treatment, "earnings" in such a covenant is interpreted as profit after interest and tax, i.e. the $6.8m we've just calculated.
6.8 million<7 million6.8\ \text{million} < 7\ \text{million}6.8 million<7 million So the covenant will be breached.
The retention rate (80%) and bond market price (80% of nominal) are red herrings for the covenant calculation.
Therefore the correct option is:
C). The earnings will be = $6.80 million (The covenant will be breached).
NEW QUESTION # 239
A company has a loss-making division that it has decided to divest in order to raise cash for other parts of the business.
The losses stem from a combination of a lack of capital investment and poor divisional management.
The loss-making division would require new capital investment of at least $20 million in order to replace worn out and obsolete assets.
If this investment was carried out, the present value of the future cashflows, excluding the investment expenditure, is expected to be $15 million.
Which TWO of the following divestment methods are most likely to be suitable for the company?
- A. Liquidation
- B. Spin-off
- C. De-merger
- D. Management buy-out
- E. Trade sale
Answer: A,E
NEW QUESTION # 240
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