Cima certsexpert cima Strategic Level F3 Cima Study Notes by Amanda q78 vce pdf

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Exam Name:	Financial Strategy
Exam Code:	F3 Dumps
Vendor:	CIMA	Certification:	CIMA Strategic level
Questions:	435 Q&A's	Shared By:	amanda

Question 24

Which THREE of the following methods of business valuation would give a valuation of the equity of an entity, rather than the value of the whole entity?

Options:

Expected dividend in one year's time / (cost of equity - growth rate).

Total earnings x appropriate price-earnings ratio.

Forecast future cash flows to all Investors, discounted at the weighted average cost of capital.

Forecast future cash flows to equity, discounted at the cost of equity.

Non-current assets, plus current assets, minus current liabilities

Discussion

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Question 25

Company M is a listed company in a highly technical service industry.

The directors are considering making a cash offer for the shares in Company Q, an unquoted company in the same industry.

Relevant data about Company Q:

• The company has seen consistent growth in earnings each year since it was founded 10 years ago.

• It has relatively few non-current assets.

• Many of the employees are leading experts in their field. A recent exercise suggested that the value of the company's human capital exceeded the value of its tangible assets.

The directors and major shareholders of Company Q have indicated willingness to sell the company.

Before negotiations become too advanced, the directors of Company M are considering the benefits to their company that would follow the acquisition.

Which THREE of the following are the most likely benefits of the acquisition to Company M's shareholders?

Options:

Access to technical expertise.

Reduction of risk through diversification.

Improved asset backing for borrowing due to the acquisition of intangible assets.

Gain economies of scale.

Improve earnings per share (EPS).

Discussion

Question 26

Country X's short-term interest rates are slightly higher than its long-term rates. Which THREE of the following statements are correct?

Options:

This difference may reverse.

Country X's currency is expected to strengthen in the long-term.

Interest rates will definitely fall.

Interest rates are expected to fall.

A long-term borrower would save by taking out a short-term loan and then refinancing

Discussion

Question 27

A listed company is planning a share repurchase.

The following data applies:

• There are 10 million shares in issue

• The share repurchase will involve buying back 20% of the shares at a price of $0.75

• The company is holding $2 million cash

• Earnings for the current year ended are $2 million

The Directors are concerned about the impact that this repurchase programme will have on the company's cash balance and current year earnings per share (EPS) ratio.

Advise the directors which of the following statements is correct?

Options:

The cash balance will decrease by 75% and EPS will decrease by 25%.

The cash balance will decrease by 75% and EPS will increase by 25%.

The cash balance will decrease by 20% and the EPS will decrease by 25%.

The cash balance will decrease by 20% and the EPS will increase by 25%.

Discussion

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