Question 1

Extracts from a company's profit forecast for the next financial year as follows:Since preparing the forecast, the company has decided to return surplus cash to shareholders by a sharerepurchase arrangement.The share repurchase would result in the company purchasing 20% of the 1,250 million ordinary sharescurrently in issue and canceling them.Assuming the share repurchase went ahead, the impact on the company's forecast earnings per share will be anincrease of:

Options :

A : $0.100

B : $0.125

C : $0.175

D : $0.200

Answer: A

Question 2

A company’s statement of financial position includes non-current assets which are leased, the tax regime

follows the accounting treatment.

Which cash flows should be discounted when evaluating the cost of lease finance?

Options :

A : Lease payments, implied interested and straight-line accounting deprediation.

B : Lease payments and straight-line accounting depreciation.

C : Lease payments and implied interest.

D : Lease payments, tax relief on implied interest and tax relief on straight-line account depreciation.

Answer: B

Question 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?

Options :

A : The realisation of anticipated post-acquisition synergies.

B : The development of a dividend policy to meet the expectations of the target company shareholders.

C : The integration and retention of key employees.

D : The regulatory approval required to complete the acquisition.

E : The retention of key customers of the acquired company.

Answer: A,C

Question 4

Which THREE of the following statements are correct?

Options :

A : A portfolio can be diversified by increasing the number of securities in different industries held in the portfolio.

B : Systematic risk can be eliminated in a diversified portfolio.

C : The beta of a company-s shares reflects systematic risk.

D : A beta of 1 indicates that the investment is risk free.

E : The security market line (SML) shows the relationship between systematic risk and return.

Answer: A,C

Question 5

When valuing an unlisted company, a P/E ratio for a similar listed company may be used but adjustments tothe P/E ratio may be necessary.Which THREE of the following factors would justify a reduction in the proxy p/e ratio before use?

Options :

A : The relative lack of marketability of unlisted company shares.

B : A lower level of scrutiny and regulation for unlisted companies.

C : Unlisted companies being generally smaller and less established.

D : Unlisted companies being generally smaller and less established.

E : The forecast earnings growth being relatively higher in the unlisted company.

F : A profit item within the unlisted company-s latest earnings which will not reoccur.

Answer: A,B,C

Free CIMAPRA19-F03-1-ENG Mock Exam – Practice Online Confidently

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