Pass the CIMA Strategic F3 Questions and answers with Dumpstech

JAG and ZEB are two listed companies. JAG is approximately 20 times the size of ZEB.

10 days ago JAG made a hostile bid for ZEB. offering a share exchange.

The bid price represents a 10% profit to the shareholders of ZEB at today's market prices to reflect the high levels of synergistic benefits that JAG expects to realise from the transaction.

Which of the following is the greatest future threat to the post-transaction value for JAG?

The shares of a company in a high technology industry have been listed on a stock exchange for 10 years. During this period, it has paid no dividends but invested all retained earnings in growth. The company is now entering a period of relatively stable growth and the directors are considering beginning to pay dividends They are reviewing the following suggestions made by members of the board:

• Pay cash dividends linked to growth in earnings

• Use a residual theory approach to establish cash dividends

• Issue scrip dividends (shares instead of cash)

• Continue to pay no dividends as dividends are irrelevant to the value of the company

Which THREE of the following are correct statements for the directors to take into consideration when making a decision about future dividend policy?

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

Which of the following statements is TRUE?

PPA owns $500,000 of shares in Company ABB. Company ABB has a daily volatility of 2% of its share price

Calculate the 12-day value at risk that shows the most PPA can expect to lose during a 12-day period (PPA wishes to be 90% certain that the actual loss in any month will be less than your predicted figure)

Give your answer to the nearest thousand dollars.

A company aims to increase profit before interest and tax (PBIT) each year.

The company reports in A$ but has significant export sales priced in B$. 

All other transactions are priced in A$.

In 20X1, the company reported:

In 20X2, the only changes expected are:

   • An increase in export prices of 10%, but no change to units sold.

   • A rise in the value of the B$ to A$/B$ 2.500 (that is, A$ 1 = B$ 2.5)

Is it likely that the company would still meet its objective to grow PBIT between 20X1 and 20X2?

A company's Board of Directors wishes to determine a range of values for its equity.

The following information is available:

Estimated net asset values (total asset less total liabilities including borrowings):

   • Net book value = $20 million

   • Net realisable value = $25 million

   • Free cash flows to equity = $3.5 million each year indefinitely, post-tax.

   • Cost of equity = 10%

   • Weighted Average Cost of Capital = 7%

Advise the Board on reasonable minimum and maximum values for the equity.

A company is planning to issue a 5 year $100 million bond at a fixed rate of 6%.

It is also considering whether or not to enter into a 10 year $100 million swap to receive 5% fixed and pay Libor + 1% once a year.

The company predicts that Libor will be 4% over the life of the 5 years.

What is the impact of the swap on the company's annual interest cost assuming that the Libor prediction is correct?  

A company which is forecast to experience a strong growth in its profitability is evaluating a potential bond issue.

Which of the following changes in corporate income tax and in bond yields would make the bond issue more attractive to the company?

Which THREE of the following statements are correct?

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?