Study with CIMAPRA19-F03-1 Actual Test Questions

Company A is subject to a takeover bid from Company B, both companies operate in the same industry and each of them demand a significant market share Company B h3S made an of an of $5 per share to the shareholders of Company A.
The directors of Company A do not believe the takeover would be in the best interests of the stakeholders and other stakeholders of Company A due to the following reruns
1. Company B has recently taken ever several ether companies resulting in them breaking up the company and se ling on the assets.
2 The directors of Company A believe the offer of $5 per snare undervalues tie company The directors of Company A are therefore keen to prevent the bid from going ahead Which THREE of the following defence strategies could be used by the directors of Company Air this situation?

• A. Refer the bid to the Competition Authorizes because of the risk of a large number of employee redundancies if Company B's Did were to be successful
• B. Appeal to their own shareholders that the company should not be broken up because i: has strong growth prospects.
• C. Inform shareholders of the potential current value of the non-current assets including intangibles, to show that their true value is higher than the bid value.
• D. Give existing shareholders the right to buy bonds in the future.
• E. Offer the company to an alternative While Knight bidder.

A company with a market capitalisation of S50million is considering raising $1 million debt to fund a new
10-year capital investment protect
The value of this issue is considered to be small in comparison to the company's market capitalisation The company is considering whether to raise the debt finance by either a "bond private placing' or a 'public bond issue.
Which THREE of the following statements are correct?

• A. An initial public bond issue will be administratively complex and relatively expensive for the relatively small amount of debt being raised whereas a bond private placing will be relatively less complex
• B. An initial public bond issue can be arranged relatively quickly whereas a bond private placing can take up to a year to arrange.
• C. The company's credit rating will be a key element in determining the interest rate payable and the potential success of either the public bond issue or the bond private placing
• D. An average investor is made aware of a potential initial public bond issue whereas the average investor is only made aware of a bond private placing after it has occurred.
• E. An initial public bond issue does not need to be underwritten whereas a bond private placing must be underwritten.

A company is planning a share repurchase programme with the following details:
* Repurchased shares will be immediately cancelled.
* The shares will be purchased at a premium to the market share price.
The current market share price is greater than the nominal value of the shares.
Which of the following statements about the impact of the share repurchase programme on the company's financial statements is correct?

• A. The total value of the equity in its Statement of Financial Position would remain unchanged.
• B. The premium to the nominal value would be charged to retained earnings.
• C. The share capital figure would reduce by the nominal value of the shares purchased.
• D. The premium to the market value would be charged to the Income Statement.

XCV can borrow at either 9.5% fixed or the risk-free rate plus 1.3%.
XCV wishes to borrow at a variable rate and thinks that a swap may enable it to do so cheaply BNM can borrow the same principal sum as XCV It can borrow at 10 5% fixed or the risk-free rate plus 2 1 % BNM wishes to raise fixed rate debt XCV and BNM have agreed to use an interest rate swap They will share any savings equally Calculate the effective swap rate that will be paid by XCV.
Give your answer to one decimal place.

Pending

G purchased a put option that grants the right to cap the interest on a loan at 10.0%. Simultaneously, G sold a call option that grants the holder the benefits of any decrease if interest rates fall below 8.5%.
Which THREE possible explanations would be consistent with G's behavior?

• A. G is willing to risk the loss of savings from a fall in interest rates if that offsets the cost of limiting the cost of rises.
• B. G is concerned that interest rates may rise above 8.5%.
• C. G's strategy is to ensure that its interest rates lie between 8.5% and 10.0%.
• D. G is concerned that interest rates may rise above 10.0%.
• E. G is concerned that interest rates may fall below 10%.