Get CIMA F3 Dumps Questions [2026] To Gain Brilliant Result [Q208-Q233]

Get CIMA F3 Dumps Questions [2026] To Gain Brilliant Result

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CIMA F3 (Financial Strategy) Certification Exam is a professional certification exam that is designed to test the knowledge and skills of financial professionals who want to take their careers to the next level. F3 exam is offered by the Chartered Institute of Management Accountants (CIMA), which is a globally recognized professional body that provides training and certification programs for management accountants. The F3 exam is focused on financial management and strategic decision-making, and it is an essential qualification for professionals who want to work in senior-level financial roles.

Achieving certification in F3 Financial Strategy demonstrates a high level of expertise in financial strategy and can enhance a candidate's career prospects in the field of management accounting. Successful candidates are awarded a CIMA Advanced Diploma in Management Accounting, which is recognized globally as a mark of excellence in the profession.

 

NEW QUESTION # 208
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:

• A. performing activities in the least amount of time possible
• B. obtaining quality inputs at minimum cost.
• C. obtaining maximum output from minimum inputs
• D. spending funds so as to achieve the objectives of the entity.

Answer: A

NEW QUESTION # 209
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.

Answer:

Explanation:
$ ?
2.02, 2.03
Explanation:
In CIMA F3, rights issues and post-issue valuation are taught under the learning outcomes relating to financing decisions, equity issuance, and shareholder value analysis. The Theoretical Ex-Rights Price (TERP) represents the price a share should trade at immediately after the rights issue when the "value dilution" and
"value added" of the project are taken into account.
According to the financial strategy principles taught in F3, the TERP is calculated by adding:
The current market value of equity,
The cash raised from the rights issue, and
The net present value (NPV) of the investment project,
then dividing by the total number of shares after the issue. This reflects the CIMA F3 view that share prices should adjust to reflect both new financing inflows and future economic benefits associated with positive- NPV projects.
Step-by-step application of the F3 method
(1) Current shareholders' equity value:
(2) Rights issue price:
Rights issued at a 10% discount:
(3) Number of new shares issued:
(4) Total shares after issue:
(5) Total value after issue and project:
Add value of cash raised and NPV:
(6) TERP formula:
Rounded to two decimal places:
This calculation follows the CIMA F3 principle that positive-NPV projects increase shareholder wealth, and therefore must be added to the total post-issue company valuation before dividing by the enlarged share capital.

NEW QUESTION # 210
A company wishes to raise new finance using a rights issue. The following data applies:
* There are 20 million shares in issue with a market value of $6 each
* The terms of the rights will be 1 new share for 4 existing shares held
* After the rights issue, the theoretical ex-rights price (TERP) will be $5.75 Assuming all shareholders take up their rights, how much new finance will be raised ?
Give your answer to one decimal place.

Answer:

Explanation:
$ ? million
7.5, 7.50Workings:Existing shares = 20m at $6 # current value = 20m × 6 = $120mRights: 1 new for 4 existing # New shares = 20m / 4 = 5mTotal shares after issue = 20m + 5m = 25mTERP after issue = $5.75Use TERP to back out funds raised (X):120+X25=5.75\frac{120 + X}{25} = 5.7525120+X=5.75 120+X=25×5.
75=143.75120 + X = 25 \times 5.75 = 143.75120+X=25×5.75=143.75 X=143.75#120=23.75 millionX =
143.75 - 120 = 23.75 \text{ million}X=143.75#120=23.75 million Rounded to 1 decimal place: $23.8 million

NEW QUESTION # 211
Using the CAPM, the expected return for a company is 11%. The market return is 8% and the risk free rate is
2%.
What does the beta factor used in this calculation indicate about the risk of the company?

• A. It is not possible to tell from CAPM.
• B. It has the same risk as the average market risk.
• C. It has lower risk than the average market risk.
• D. It has greater risk than the average market risk.

Answer: D

Explanation:
Likely outcomes after two listed companies in the same industry merge:
A). Increase in customer base - yes, customers of both firms now belong to the combined entity.
B). Competition authorities step in to stop... - that usually happens before or to prevent the merger, not "after it has happened", so not chosen.
C). Decrease in employee motivation due to internal changes - very common effect of mergers (uncertainty, restructuring).
D). Changes to supplier relationships owing to internal changes - the merged firm will have different bargaining power and processes; very likely.
E). Cost savings from synergistic benefits and economies of scale - one of the main motives for merger.

NEW QUESTION # 212
The Board of Directors of a listed company wish to estimate a reasonable valuation of the entire share capital of the company in the event of a takeover bid.
The company's current profit before taxation is $10 0 million.
The rate of corporate tax is 20%.
The average P/E multiple of listed companies in the same industry is 10 times current earnings.
The P/E multiple of recent takeovers in the same industry have ranged from 11 times to 12 times current earnings.
The average P/E multiple of the top 100 companies on the stock market is 16 times current earnings.
Advise the Board of Directors which of the following is a reasonable estimate of a range of values of the entire share capital in the event of a bid being made for the whole company?

• A. Minimum = S80 million, and maximum = $128 million.
• B. Minimum = $88 million, and maximum = $96 million.
• C. Minimum = $110 million, and maximum = $120 million.
• D. Minimum = S100 million, and maximum = $120 million.

Answer: B

NEW QUESTION # 213
M is an accountant who wishes to take out a forward rate agreement as a hedging instrument but the company treasurer has advised that a short-term interest rate future would be a better option.
Which of the following is true of a short-term interest rate future?

• A. It must be kept for ne whole duration of the contract
• B. It interest rates have gone down the price of the future will have fallen.
• C. It can be tailored to the exact reeds of the company.
• D. The date is flexible and the position can be closed quickly and easily.

Answer: D

Explanation:
Short-term interest rate futures (STIRs) are:
Standardised, exchange-traded contracts
Not tailored exactly to one company's needs (that's FRAs)
Traded on an exchange, so you can close out early by taking an opposite position If interest rates fall, futures prices rise (since price # 100 - interest rate) Now check each statement:
A). "Tailored to exact needs" # False (that's an FRA)
B). "If interest rates go down the price will have fallen" # False (it rises)
C). "Must be kept for whole duration" # False
D). "Date is flexible and the position can be closed quickly and easily" # True (you choose the contract month and can close out any time before expiry)

NEW QUESTION # 214
A listed company is planning a share repurchase.
Research into different offer prices has given the following data with regards acceptance by the shareholders at different prices:

What price should be offered to shareholders if the retained earnings of the company are to remain unchanged?

• A. $10.00
• B. $9.00
• C. $9.50
• D. $8.50

Answer: C

NEW QUESTION # 215
Company A is planning to acquire Company B by means of a cash offer. The directors of Company B are prepared to recommend acceptance if a bid price can be agreed. Estimates of the net present value (NPV) of future cash flows for the two companies and the combined group post acquisition have been prepared by Company A's accountant. There are as follows:
What is the maximum price that Company A should offer for the shares in Company B?
Give your answer to the nearest $ million

Answer:

Explanation:
150

NEW QUESTION # 216
A listed company in a high growth industry, where innovation is a key driver of success has always operated a residual dividend policy, resulting in volatility in dividends due to periodic significant investments in research and development.
The company has recently come under pressure from some investors to change its dividend policy so that shareholders receive a consistent growing dividend. In addition, they suggested that the company should use more debt finance.
If the suggested change is made to the financial policies, which THREE of the following statements are true?

• A. The company's financial risk will increase due to its increased use of debt finance.
• B. It may give a signal to the market that the company is entering a period of stable growth.
• C. Retained earnings have a lower cost than debt finance.
• D. The directors will not have to take shareholder dividend preferences into consideration in future.
• E. There may be a change to the shareholder profile due to 'the clientele effect'.

Answer: A,B,E

NEW QUESTION # 217
The directors of the following four entities have been discussing dividend policy:

Which of these four entities is most likely to have a residual dividend policy?

• A. B
• B. A
• C. D
• D. C

Answer: A

NEW QUESTION # 218
A company wishes to raise additional debt finance and is assessing the impact this will have on key ratios.
The following data currently applies:
* Profit before interest and tax for the current year is $500,000
* Long term debt of $300,000 at a fixed interest rate of 5%
* 250,000 shares in issue with a share price of $8
The company plans to borrow an additional $200,000 on the first day of the year to invest in new project which will improve annual profit before interest and tax by $24,000.
The additional debt would carry an interest rate of 3%.
Assume the number of shares in issue remain constant but the share price will increase to $8.50 after the investment.
The rate of corporate income tax is 30%.
After the investment, which of the following statements is correct?

• A. Interest cover will rise; P/E ratio will fall.
• B. Interest cover will fall; P/E ratio will rise.
• C. Interest cover will fall; P/E ratio will fall.
• D. Interest cover will rise; P/E ratio will rise.

Answer: B

NEW QUESTION # 219
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. Lease payments
• B. Maintenance payments
• C. Bank loan payments
• D. Tax relief on tax depreciation allowances
• E. Tax relief on the book depreciation

Answer: A,D,E

Explanation:
Relevant cash flows for a lease-or-buy decision (discounting at post-tax cost of borrowing) are:
A). Tax relief on tax depreciation allowances - relevant for the buy option.
B). Bank loan payments - not relevant; financing flows are excluded when using the borrowing rate as discount rate.
C). Maintenance payments - here, maintenance is paid by the lessee under the lease, and would also be paid if the asset is bought; since it is the same under both options, it is not a differential cash flow.
D). Lease payments - relevant cash outflows under the lease option.
E). Tax relief on the book depreciation - relevant where tax relief is given on book depreciation (here, under the finance lease).
Therefore, the three relevant cash flows from the list are:
Answer (200259):
A, D, E\boxed{A,\ D,\ E}A, D, E

NEW QUESTION # 220
Formed in 2010, the International Integrated Reporting Council <IIRC) brings together a cross-section of representatives from a wide variety of business sectors The primary purpose of the IIRC's framework is to help enable an organisation to communicate which of the following'?

• A. How it contributes positively to the economic wellbeing of the environment in which it operates.
• B. How it ensures that the conflicting net sets of different stakeholder groups are met in an optimal manner.
• C. How it creates value in the short medium and long term.
• D. How it minimises the environmental impact of its business processes.

Answer: C

NEW QUESTION # 221
A national airline has made an offer to acquire a smaller airline in the same country.
Which of the following would be of most concern to the competition authorities?

• A. The board informed a major institutional shareholder about the proposed acquisition before informing other shareholders.
• B. After the acquisition the board propose to reduce the number of flight destinations from the country.
• C. After the acquisition the board propose to increase prices significantly on routes where no other airlines operate.
• D. The acquisition is likely to result in significant redundancies of staff currently working for the smaller airline.

Answer: C

NEW QUESTION # 222
Company BBB has prepared a valuation of a competitor company, Company BBD. Company BBB is intending to acquire a controlling interest in the equity of Company BBD and therefore wants to value only the equity of Company BBD.

The directors of Company BBB have prepared the following valuation of Company BBD:
Value of Equity = 4.63 + 5.14 + 5.56 = S15.33 million
Additional information on Company BBD:

Which THREE of the following are weaknesses of the above valuation?

• A. Free cash flows to all investors should be discounted at the cost of equity of 10% rather than WACC of
  8%.
• B. The valuation is overstated as the directors have failed to deduct tax from the free cash flows.
• C. The valuation is understated as the directors have failed to include a perpetuity factor in the calculations.
• D. The valuation is understated as forecast future growth has been ignored beyond year 3.
• E. The approach used calculates the value of the total entity not the value of equity.

Answer: B,C,E

NEW QUESTION # 223
On 1 January 20X1, a company had:
* Cost of equity of 10 0%.
* Cost of debt of 5.0%
* Debt of $100Mmilion
* 100 million $1 shares trading at $4.00 each.
On 1 February 20X1:
* The company's share police fell to $3.00.
* Debt and the cost of debt remained unchanged
The company does not pay tax.
Under Modigliani and Miller's theory without lax. what is the best estimate of the movement in the cost of equity as a result of the fall in ne share price?

• A. It will fall to 9.3%.
• B. It will rise to 11.2%.
• C. It will rise to 10.3%.
• D. It will stay the same at 10.0%.

Answer: D

NEW QUESTION # 224
Company A, a listed company, plans to acquire Company T, which is also listed.
Additional information is:
* Company A has 100 million shares in issue, with market price currently at $8.00 per share.
* Company T has 90 million shares in issue,. with market price currently at $5.00 each share.
* Synergies valued at $60 million are expected to arise from the acquisition.
* The terms of the offer will be 2 shares in A for 3 shares in B.
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.
$ ? .

Answer:

Explanation:
8.19, 8.18

NEW QUESTION # 225
A company has stable earnings of S2 million and its shares are currently trading on a price earnings multiple
{PIE) of 10 times. It has10 million shares in issue.
The company is raising S4 million debt finance to fund an expansion of its existing business which is forecast to increase annual earnings straight away by 25% and then remain at that level for the foreseeable future. The corporation tax rate is 20%. It is expected that the P/E will reduce to 8 times over the next year.
What is the most likely change in shareholder wealth resulting from this plan?

• A. No change in shareholder wealth.
• B. Shareholder wealth will increase by $5 million
• C. Shareholder wealth will increase by $4 million.
• D. Shareholder wealth will increase by $3.2 million.

Answer: C

NEW QUESTION # 226
A listed company is planning a share repurchase.
Research into different offer prices has given the following data with regards acceptance by the shareholders at different prices:

What price should be offered to shareholders if the retained earnings of the company are to remain unchanged?

• A. $10.00
• B. $9.00
• C. $9.50
• D. $8.50

Answer: C

NEW QUESTION # 227
A product costs USD10 when purchased in the USA. The same product costs USD12 when it is purchased in the UK and the price in GBP is convened to USD.
Which of the following statement concerning purchasing power parity is correct?

• A. This type of price deferential is a reliable baas for predicting currency movements
• B. Economic forces will bring the prices in the USA and UK into line.
• C. Economic forces should eliminate the price difference. but there could be market imperfections that permit it to persist.
• D. The exchange rate between the USD and GBP will change so that tie price differential on this product (and at other products) is eliminated.

Answer: C

NEW QUESTION # 228
Company A is located in Country A, where the currency is the A$.
It is listed on the local stock market which was set up 10 years ago.
It plans a takeover of Company B, which is located in Country B where the currency is the B$, and where the stock market has been operating for over 100 years.
Company A is considering how to finance the acquisition, and how the shareholders of Company B might respond to a share exchange or cash (paid in B$).
Which of the following is likely to explain why the shareholders of Company B would prefer a share exchange as opposed to a cash offer?

• A. They would receive shares in a market that is likely to be more efficient.
• B. It would enable them to benefit from the future performance of the combined entity.
• C. It would allow them to realise their investment and make a capital gain.
• D. It would avoid them being exposed to foreign currency risk.

Answer: B

NEW QUESTION # 229
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. A - 25
• B. B - 62
• C. D - 60
• D. C - 67

Answer: D

Explanation:
Current value of Z = 590m.
Price for targets: A 25m, B 62m, C 67m, D 60m.
Synergy (or value added) = Combined value - (Z value + Target price):
A: 620 - (590 + 25) = 5m
B: 655 - (590 + 62) = 3m
C: 666 - (590 + 67) = 9m
D: 652 - (590 + 60) = 2m

NEW QUESTION # 230
A listed company is considering either a one-off special divided or a share repurchase scheme to reduce its surplus cash level.
Identify TWO advantages that a one-off special payment has over a share repurchase scheme.

• A. It will reduce the possibility of a hostile takeholder
• B. It is easier to arrange than a share repurchase
• C. It would result in a transfer of wealth back to the shareholder
• D. It will change balance of share owners.
• E. It allows shareholder a choice of option in or out of the payment.

Answer: B,C

Explanation:
Compared with a share repurchase, a one-off special dividend:
is administratively simpler to arrange,
returns surplus cash directly to shareholders (all shareholders receive cash, ownership proportions are unchanged).
Answers: D and E

NEW QUESTION # 231
A company enters into a floating rate borrowing with interest due every 12 months over the five year life of the borrowing.
At the same time, the company arranges an interest rate swap to swap the interest profile on the borrowing from floating to fixed rate.
These transactions are designated as a hedge for hedge accounting purposes under IAS 39 Financial Instruments: Recognition and Measurement.
Assuming the hedge is considered to be effective, how would the swap be accounted for 12 months later?

• A. The swap would be shown at fair value the statement of financial position and the change in value posted to other comprehensive income.
• B. The swap would be shown at nominal value in the statement of financial position and the change in value posted to profit or loss.
• C. The swap would be shown at fair value the statement of financial position and the change in value posted to profit or loss.
• D. The swap would be shown at nominal value in the statement of financial position and the change in value posted to other comprehensive income.

Answer: A

Explanation:
The swap would be shown at fair value in the statement of financial position and the change in value posted to other comprehensive income.

NEW QUESTION # 232
A company wishes to raise new finance using a rights issue to invest in a new project offering an IRR of 10% The following data applies:
* There are currently 1 million shares in issue at a current market value of $4 each.
* The terms of the rights issue will be $3.50 for 1 new share for 5 existing shares.
* The company's WACC is currently 8%.
What is the yield-adjusted theoretical ex-rights price (TERP)?
Give your answer to 2 decimal places.

Answer:

Explanation:
$ ?
4.06, 4.060

NEW QUESTION # 233
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