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Newest F3 Test Dates | F3 100% Free Reliable Exam TestYou only need 20-30 hours to learn our F3 test braindumps and then you can attend the exam and you have a very high possibility to pass the F3 exam. For many people whether they are the in-service staff or the students they are busy in their job, family lives and other things. But you buy our F3 prep torrent you can mainly spend your time energy and time on your job, the learning or family lives and spare little time every day to learn our F3 Financial Strategy exam torrent. And you will pass the F3 exam as it is a piece of cake to you with our F3 exam questions. CIMA F3 Financial Strategy Sample Questions (Q66-Q71):NEW QUESTION # 66
Select the category of risk for each of the descriptions below: Answer:
Explanation:
NEW QUESTION # 67
A company plans to acquire new machinery.
It has two financing options; buy outright using a bank loan, or a finance lease.
Which of the following is an advantage of a finance lease compared with a bank loan?
A. Tax depreciation allowances may be passed on to the company by the lessor.
B. It is "off-balance sheet" and will not affect the company's gearing.
C. The interest rate offered might be more favourable because the lessor has the security of the asset.
D. The lessor provides maintenance of the asset.
Answer: C
Explanation:
In CIMA F3, finance leases are analysed as a form of debt financing and are compared directly with bank loans when evaluating long-term funding options. The syllabus (under Financing Decisions and Leasing vs Buying) explains that a finance lease is economically similar to borrowing to purchase an asset, because the lessee assumes substantially all the risks and rewards of ownership.
Option B is correct because one key advantage of a finance lease over a bank loan is that the lessor retains legal ownership of the asset, which provides strong security for the lender. As a result, the lessor's risk is lower than that of a bank providing an unsecured or partially secured loan. CIMA F3 study guidance highlights that this reduced risk can allow the lessor to offer more favourable interest rates or financing terms than a conventional bank loan.
The other options are incorrect under current accounting and financial strategy principles:
A is incorrect because finance leases are not off-balance sheet. Under IFRS 16 (examined in F3), finance leases must be recognised on the statement of financial position, increasing both assets and liabilities and therefore affecting gearing.
C is incorrect because tax depreciation (capital allowances) normally remain with the legal owner, the lessor.
These benefits are not "passed on" directly, although they may be reflected indirectly in lease pricing.
D is incorrect because maintenance is a feature of operating leases, not finance leases. In a finance lease, the lessee is responsible for maintenance and insurance.
NEW QUESTION # 68
Company M is a geared company whose equity has a market value of $1,500 million and debt has a market value of S300 million. The company plans to issue $200 million of new shares and use the funds raised to pay off some of the debt Company M currently has a cost of equity of 13% and a WACC of 10% It pays corporate tax at the rate of
30% Company B, an ungeared company operating in the same business sector as Company M, has a cost of equity of 12% Assume Modigliani and Miller's theory of capital structure with tax applies Which calculation below shows the correct approach to calculating the new WACC following the planned changes in capital structure?
A.
B.
C.
D.
Answer: A
Explanation:
To get the new WACC using Modigliani & Miller with tax:Find the ungeared (asset) cost of capital, KuK_uKu.Company B is ungeared and in the same business, so its cost of equity = asset return:Ku=12%K_u
= 12%Ku=12% Work out the new capital structure after the refinancing.Current equity = $1,500mCurrent debt = $300mNew equity issue = $200m (used to repay debt)New equity E1=1,500+200=1,700E_1 = 1,500 +
200 = 1,700E1=1,500+200=1,700New debt D1=300#200=100D_1 = 300 - 200 = 100D1=300#200=100Total value (using market values) V1=D1+E1=100+1,700=1,800V_1 = D_1 + E_1 = 100 + 1,700 = 1,800 V1=D1+E1=100+1,700=1,800.Apply MM with tax for WACC:WACC=Ku[1#TDV] ext{WACC} = K_u
left[1 - T rac{D}{V}ight]WACC=Ku[1#TVD] WACC1=12%[1#0.30¡Á1001,800] ext{WACC}_1 = 12%
left[1 - 0.30 imes rac{100}{1,800}ight]WACC1=12%[1#0.30¡Á1,800100] This gives approximately:12%
¡Á(1#0.0167)#12%¡Á0.9833#11.8%12% imes (1 - 0.0167) approx 12% imes 0.9833 approx 11.8%12%¡Á (1#0.0167)#12%¡Á0.9833#11.8% This matches option B: 11.8%=12%¡Á[1#(0.30¡Á100/1,800)]11.8% = 12%
imes [1 - (0.30 imes 100 / 1,800)]11.8%=12%¡Á[1#(0.30¡Á100/1,800)].
NEW QUESTION # 69
A company is undertaking a lease-or-buy evaluation, using the post-tax cost of bank borrowing as the discount rate.
Details of the two alternatives are as follows:
Buy option:
* To be financed by a bank loan
* Tax depreciation allowances are available on a reducing-balance basis
* Assets depreciated on a straight-line basis
Lease option:
* Finance lease
* Maintenance to be paid by the lessee
* Tax relief available on interest payments and book depreciation
Which THREE of the following are relevant cashflows in the lease-or-buy appraisal?
A. Tax relief on the book depreciation
B. Tax relief on tax depreciation allowances
C. Bank loan payments
D. Lease payments
E. Maintenance payments
Answer: A,B,D
NEW QUESTION # 70
Listed Company A has prepared a valuation of an unlisted company. Company B. to achieve vertical integration Company A is intending to acquire a controlling interest in the equity of Company B and therefore wants to value only the equity of Company B.
The assistant accountant of Company A has prepared the following valuation of Company B's equity using the dividend valuation model (DVM):
Where:
* S2 million is Company B's most recent dividend
* 5% is Company B's average dividend growth rate over the last 5 years
* 10% is a cost of equity calculated using the capital asset pricing model (CAPM), based on the industry average beta factor
Which THREE of the following are valid criticisms of the valuation of Company B's equity prepared by the assistant accountant?
A. An unlisted company cannot use the capital asset pricing model to calculate its cost of equity
B. The DVM calculation should use Company A's cost of equity rather than Company B's cost of equity
C. The beta factor used may not reflect Company B's financial risk.
D. It is better to use the present value of earnings rather than present value of dividends to value a controlling interest
E. The 5% growth rate may not reflect the future growth of Company B.
Answer: B,C,E
NEW QUESTION # 71
......
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