Free CIMAPRA19-F03-1 Practice Test Questions and Answers (2026)

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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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Q: 11

It is now 1 January 20X0. Company V, a private equity company, is considering the acquisition of 40% of the equity of Company A for a total amount of $15 million. Company A has been established to develop a new type of engine which will be launched at the end of 20X1. Company A is forecasting that the new engine will result in free cash flows to equity of $2m in its first year of operation and that this will rise by 8% per year for the foreseeable future. The new engine is the only commercial activity that Company A is involved in. Company V intends to sell its stake in Company A when the new engine is launched. Company A has a cost of equity of 12%. Assuming that Company V receives an amount that reflects the present value of their shares in company A. what is the estimated annual rate of return to Company V from this investment? (To the nearest %)

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Q: 12
A company is currently all-equity financed. The directors are planning to raise long term debt to finance a new project. The debt:equity ratio after the bond issue would be 30:60 based on estimated market values. According to Modigliani and Miller's Theory of Capital Structure without tax, the company's cost of equity would:
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Q: 13

DRAG DROP CI IJ has decided to move its production plant to overseas country X. This would make the product cheaper to produce. The technology used to make the product is very advanced and some of the skilled staff would have to move to country X. The Production Director has identified that there are some political risks in moving to county X. For each of the political risks of moving to country X shown below, select the correct method for reducing the risk. CIMA CIMAPRA19 F03 1 question

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Q: 14

DRAG DROP Select the most appropriate divided for each of the following statements: CIMA CIMAPRA19 F03 1 question

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Q: 15

DRAG DROP Select the category of risk for each of the descriptions below: CIMA CIMAPRA19 F03 1 question

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Q: 16

HOTSPOT A company's directors plan to increase gearing to come in line with the industry average of 40%. They need to know what the effect will be on the company's WACC. According to traditional theory of gearing the WACC is most likely to: CIMA CIMAPRA19 F03 1 question

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Q: 17
The Board of Directors of a small listed company engaged in exploration are currently considering the future dividend policy of the company. Exploration is considered a high-risk business and consequently the company has a low level of debt finance. Forecasts indicate a period of profit fluctuation in the next few years as the company is planning to embark on a major capital investment project. Debt finance is unlikely to be available due to the project's high business risk. Which THREE of the following are practical considerations when determining the company's dividend/retention policy?
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Q: 18
Company A, a listed company, plans to acquire Company T, which is also listed. Additional information is: • Company A has 150 million shares in issue, with market price currently at $7.00 per share. • Company T has 120 million shares in issue,. with market price currently at $6.00 each share. • Synergies valued at $50 million are expected to arise from the acquisition. • The terms of the offer will be 2 shares in A for 3 shares in T. Assuming the offer is accepted and the synergies are realised, what should the post-acquisition price of each of Company A's shares be? Give your answer to two decimal places. CIMA CIMAPRA19 F03 1 question
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Q: 19
A listed company is planning to raise $21.6 million to finance a new project with a positive net present value of $5 million.  The finance is to be raised via a rights issue at a 10% discount to the current share price.  There are currently 100 million shares in issue, trading at $2.00 each. Taking the new project into account,  what would the theoretical ex-rights price be? Give your answer to two decimal places. $ ?
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Q: 20
Which of the following is NOT an advantage of a share repurchase?
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Question 1 of 20

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