Cima exactexam f3 Questions Bank by Frazer q156 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:	frazer

Question 72

ART manufactures traditional scooters. It has an equity beta of 1.4 and is financed entirely by equity. It plans to continue to be all-equity financed in future.

It is considering producing a range of electric scooters

GGG is a comparable quoted electric scooter manufacturer GGG has an equity beta of 2 4 reflecting its high level of gearing (the ratio of debt to equity is VI using market values).

The risk-free rate is 5%, and the market premium is 6%. The rate of corporation tax is 20%

What is the recommended discount rate that ART should use to assess the project to manufacture electric scooters?

Questions 72

Options:

Discussion

Question 73

A company based in the USA has a substantial fixed rate borrowing at an interest rate of 3.5% and wishes to swap a part of this to a floating rate to take advantage of reducing interest rates Its bank has quoted swap rates of 3 4%-3 5% against 12-month USD risk-free rate.

What is the overall interest rate achieved by the company under this borrowing plus swap combination?

Options:

12-month USD risk-free rate minus 0 1 % (where 0 1 % = the fixed rate of 3.6% minus the swap rate of 3 4%)

12-month USD risk-free rate

12-month USD risk-free rate plus 0 1% (where 0.1 % = the fixed rate of 3.5% minus the swap rate of 3 4%) D. Unchanged at 3.60% as this is the same as the swap rate

Discussion

Question 74

A listed company with a growing share price plans to finance a four-year research project with debt.

The main criterion for the finance is to minimise the annual cashflow payments on the debt.

The research will be sold at the end of the project.

Which of the following would be the most suitable financing method for the company?

Options:

Bonds with warrants

Finance lease

Standard bonds

Bank loan

Discussion

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Question 75

A large, listed company is planning a major project that should greatly improve its share price in the long term.

These plans require a significant capital cost that the company plans to finance by debt.

All of the debt options being considered are for the same duration of time.

Which of the following sources of debt finance is likely to be the most expensive for the company over the full term of the debt?

Options: