| Exam Name: | Financial Strategy | ||
| Exam Code: | F3 Dumps | ||
| Vendor: | CIMA | Certification: | CIMA Strategic level |
| Questions: | 435 Q&A's | Shared By: | nansi |
Company A is located in Country A, where the currency is the A$.
It is listed on the local stock market which was set up 10 years ago.
It plans a takeover of Company B, which is located in Country B where the currency is the B$, and where the stock market has been operating for over 100 years.
Company A is considering how to finance the acquisition, and how the shareholders of Company B might respond to a share exchange or cash (paid in B$).
Which of the following is likely to explain why the shareholders of Company B would prefer a share exchange as opposed to a cash offer?
The two founding directors of an unlisted geared company want to establish its value as they are intending to approach a venture capitalist for additional funding.
The funding will be used to invest in a major new project which has very high growth potential. The directors intend to sell 10% of the company to the venture capitalist They have prepared the following current valuation of the company using the divided valuation model:
The following information is relevant.
• $60,000 is the most recent dividend paid.
• 4% is the average dividend growth over the last few years.
• 10% is an estimate of the company's cost of equity using the CAPM model with the industry average asset beta
Which THREE of the following are weaknesses of the valuation method used in these circumstances?
A company has a 4% corporate bond in issue on which there are two loan covenants.
• Interest cover must not fall below 4 times
• Retained earnings for the year must not fall below S5 00 million
The Company has 100 million shares in issue. The most recent dividend per share was $0 10 The Company intends increasing dividends by 8% next year.
Financial projections tor next year are as follows:
Advise the Board of Directors which of the following will be the status of compliance with the loan covenants next year?
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?
TESTED 19 May 2024
