CIMAPRA19-F03-1 Exam Questions - Real Practice Questions for Guaranteed Success

Question 1

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:

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?

AGearing Is 71.43%. thin capitalisation rules are not breached

BGearing is 250%. thin capitalisation rules are breached

CGearing is 83.33%. thin capitalisation rules are breached

DGearing is 83.33%. thin capitalisation rules are not breached

Correct : C

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AGearing Is 71.43%. thin capitalisation rules are not breached

BGearing is 250%. thin capitalisation rules are breached

CGearing is 83.33%. thin capitalisation rules are breached

DGearing is 83.33%. thin capitalisation rules are not breached

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Question 2

A manufacturing company based in Country R. where the currency is the R$, has an objective of maintaining an operating profit margin of at least 10% each year

Relevant data:

* The company makes sales to Country S whose currency is the SS It also makes sales to Country T whose currency is the T$ " All purchases are from Country U whose currency is the US.

* The settlement of an transactions is in the currency of the customer or supplier

Which of the following changes would be most likely to help the company achieve its objective?

AThe T$ weakens against the R$ over time

BThe R$ strengthens against the S$ over time.

CThe R$ strengthens against the U$ over time.

DThe R$ weakens against the U$ over time

Correct : C

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AThe T$ weakens against the R$ over time

BThe R$ strengthens against the S$ over time.

CThe R$ strengthens against the U$ over time.

DThe R$ weakens against the U$ over time

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Question 4

Company WWW is considering making a takeover bid for Company KKA Company KKA's current share price is $5.00

Company WWW is considering either

" A cash payment of $5.75 for each share in Company KKA

" A 5 year corporate bond with a market value of $90 in exchange for 15 shares in Company KKA

Calculate the highest percentage premium which Company KKA shareholders will receive.

ACorporate bond premium = 80%

BCorporate bond premium = 20%

CCash premium = 10%

DCash premium = 15%

Correct : B

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ACorporate bond premium = 80%

BCorporate bond premium = 20%

CCash premium = 10%

DCash premium = 15%

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Question 5

A national rail operating company has made an offer to acquire a smaller competitor.

Which of the following pieces of information would be of most concern to the competition authorities?

AAfter the acquisition, the board proposes to increase prices on some routes not serviced by other rail operators.

BAfter the acquisition, the board proposes to withdraw some of the less profitable services.

CThe board informed a major institutional shareholder about the proposed acquisition before informing other shareholders.

DThe acquisition is likely to result in significant redundancies of staff currently working for the smaller rail operator.

Correct : A

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AAfter the acquisition, the board proposes to increase prices on some routes not serviced by other rail operators.

BAfter the acquisition, the board proposes to withdraw some of the less profitable services.

CThe board informed a major institutional shareholder about the proposed acquisition before informing other shareholders.

DThe acquisition is likely to result in significant redundancies of staff currently working for the smaller rail operator.

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Master CIMAPRA19-F03-1 Exam with Reliable Practice Questions

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