Free CIMAPRA19-F03-1 Exam Practice Questions
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CIMAPRA19-F03-1 Exam Sample Questions & Answers
A company is considering hedging the interest rate risk on a 3-year floating rate borrowing linked to the 12-month risk-free rate.
If the 12-month risk-free rate for the next three years is 2%, 3% and 4%, which of the following alternatives would result in the lowest average finance cost for the company over the three years?
A listed company plans to raise new capital which will be required for future investment projects. The company has a gearing ratio of 50%, which is just below the company's target ratio.
The directors are comparing the benefits and drawbacks of each of the following two alternative sources of finance;
* Unsecured bank borrowings.
* Convertible bonds.
Which of the following statements is correct?
HHH Company has a fixed rate loan at 10.0%, but wishes to swap to variable. It can borrow at the risk-free rate +8%. The bank is currently quoting swap rates of 3.1% (bid) and 3.5% (ask). What net rate will HHH Company pay if it enters into the swap?
Company Z has identified four potential acquisition targets: companies A, B, C and D.
Company Z has a current equity market value of $590 million.
The price it would have to pay for the equity of each company is as follows:
Only one of the target companies can be acquired and the consideration will be paid in cash.
The following estimations of the new combined value of Company Z have been prepared for each acquisition before deduction of the cash consideration:
Ignoring any premium paid on acquisition, which acquisition should the directors pursue?
A company is currently all-equity financed with a cost of equity of 9%.
It plans to raise debt with a pre-tax cost of 3% in order to buy back equity shares.
After the buy-back, the debt-to-equity ratio at market values will be 1 to 2.
The corporate income tax rate is 25%.
Which of the following represents the company's cost of equity after the buy-back according to Modigliani and Miller's Theory of Capital Structure with taxes?
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