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Q: 1
A project requires an initial outlay of $2 million which can be financed with either a bank loan or finance lease. The company will be responsible for annual maintenance under either option. The tax regime is: • Tax depreciation allowances can be claimed on purchased assets. • If leased using a finance lease, tax relief can be claimed on the interest element of the lease payments and also on the accounting depreciation charge. The trainee management accountant has begun evaluating the lease versus buy decision and has produced the following dat a.  He is not confident that all this information is relevant to this decision. CIMA CIMAPRA19 F03 1 question Using only the relevant data, which of the following is correct?
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Q: 2
When valuing an unlisted company, a P/E ratio for a similar listed company may be used but adjustments to the P/E ratio may be necessary. Which THREE of the following factors would justify a reduction in the proxy p/e ratio before use?
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Q: 3
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?
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Q: 4
Assume today is 31 December 20X1. A listed mobile phone company has just launched a new phone which is proving to be a great success. As a direct result of the product's success, earnings are forecast to increase by: • 5% a year in each of years 20X2 – 20X6 • 3% from 20X7 onwards Market analysts were very excited to hear the news of the success of the product and future growth forecasts. Assuming a semi-efficient market applies, which of the following company valuation methods is likely to give the best estimate of the company's equity value today?
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Q: 5
A company has some 7% coupon bonds in issue and wishes to change its interest rate profile. It has decided to do this by entering into a plain coupon interest rate swap with it's bank. The bank has quoted a swap rate of:      6.0% - 6.5% fixed against LIBOR. What will the company's new interest rate profile be?
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Q: 6
BBA is a wholly owned subsidiary of AAB BBA operates in country B where the currency is the B$. The following is an extract from BBA's financial statements at 31 December 20X1: CIMA CIMAPRA19 F03 1 question The following Information is relevant: " The bonds were trading at $110 per $100 on 31 December 20X1. "Operating profit of BBA for the year ended 31 December 20X1 was S15 million • The P/E ratio is 8 * Corporate income tax rate is 20%. The tax authorities m country B Implemented thin capitalisation rules based on the level of gearing of the subsidiary, calculated as book value o( debt lo book value of equity The cut-off point for gearing used by the tax authorities for a company to be thinly capitalised is 75%. Which of the following statements is correct as at 31 December 20X1?
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Q: 7
The primary objective of a public sector entity is to ensure value for money is generated. Value for money is defined as performing an activity so as to simultaneously achieve economy, efficiency and effectiveness Efficiency is defined as:
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Q: 8
A publicly funded school is focused on providing Value for Money It pays its leaching staff less than other schools, because class sizes are generally smaller than elsewhere Despite some staff demotivation from low pay, exam pass rates are high given the close one-to-one attention many pupils receive. On which aspect of Value for Money is the school underperforming?
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Q: 9
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?
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Q: 10
Company A has a cash surplus. The discount rate used for a typical project is the company's weighted average cost of capital of 10%. No investment projects will be available for at least 2 years. Which of the following is currently most likely to increase shareholder wealth in respect of the surplus cash?
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