CIMA CIMAPRA19-F03-1 valid exam dumps : F3 Financial Strategy

A major energy company, GDE, generates and distributes electricity in country A. The government of country A is concerned about rising inflation and has imposed price controls on GDE, limiting the price it can charge per unit of electricity sold to both domestic and commercial customers. It is likely that price controls will continue for the foreseeable future.
The introduction of price controls is likely to reduce the profit for the current year from $3 billion to $1 billion.
The company has:
* Distributable reserves of $2 billion.
* Surplus cash at the start of the year of $1 billion.
* Plans to pay a total dividend of $1.5 billion in respect of the current year, representing a small annual increase as in previous years. However, no dividends have yet been announced.
Which THREE of the following responses would be MOST appropriate for GDE following the imposition of price controls?

• A. Announce a reduction in the annual dividend to a more sustainable level given the new price controls regime.
• B. Actively investigate potential new ways of generating revenue by the sale of related goods and services that are outside the scope of the price controls.
• C. Raise funds by means of a rights issue in order to maintain historical dividend levels.
• D. Carry out a wide-ranging review of costs and staffing levels to identify possible cost savings and redundancies.
• E. Actively look for a private equity investor to introduce new and innovative business and financial strategies to the business.

A listed company in the retail sector has accumulated excess cash.
In recent years, it has experienced uncertainly with forecasting the required level of cash for capital expenditure due to unpredictable economic cycles.
Its excess cash is on deposit earning negligible returns.
The Board of Directors is considering the company's dividend policy, and the need to retain cash in the company.
Which THREE of the following are advantages of retaining excess cash in the company?

• A. The market may interpret the return of excess cash as a sign of weak growth prospects.
• B. The company will be in a position to respond promptly to unexpected investment opportunities.
• C. Retaining excess cash may make the company vulnerable to hostile takeover.
• D. The excess cash is earning a negligible return.
• E. Liquidity problems are less likely to be experienced if there is a downturn in business.

ZZZ is a listed company based in Brinland. a European country. It is the largest owner and operator of residential care homes for elderly people in Brinland Most of the residential care homes in Brinland are run by small private operators, and the standards of cafe are extremely variable However. 22Z has developed a good reputation because its client service is considered to be extremely good even though its prices are higher than those of most of its competitors.
ZZZ has expanded rapidly in the last few years, partly by acquisition and partly by organic growth consequently, the company's share price now stands at a record high, and the dividend declared at the end of the most recent accounting period was 10% higher than the previous year's dividend.
The Brinland government has recently set up a regulatory body to monitor the residential care homes industry.
The regulatory body is considering introducing a variety of regulations to improve the customer experience in the industry. Following a period of consultation and investigation, the regulatory body is expected to announce a range of new regulations in the near future.
The directors of ZZZ are concerned that the new regulations may adversely affect their company Which THREE of the following new regulations are likely to have the greatest negative impact on ZZTs performance?

• A. Fines for companies that miss specified service level targets
• B. Imposition of a minimum staff to client ratio.
• C. Monopoly controls, forcing large operators to dispose of some care homes
• D. Price controls, setting a maximum price that providers can charge
• E. Imposition of a one-off "windfall" tax to fund training courses for carers across the industry

Company F's current profit before interest and taxation is $5.0 million.
It has a 10% long-term corporate bond in issue with a nominal value of $10 million.
Corporate tax is paid at 25%.
The industry average P/E multiple is 10.
Company X has made an approach to acquire the entire share capital of Company F for $30 million.
Company X has announced that anticipated synergies (after interest and taxation) arising from its acquisition of Company F will be $1 million each year in perpetuity.
Advise the Board of Directors of Company F if the bid should be accepted, based on the above information?

• A. Reject the bid because Company F is potentially worth $40 million to Company X.
• B. Reject the bid because Company F is potentially worth $50 million to Company X.
• C. Reject the bid because Company F is potentially worth $60 million to Company X.
• D. Accept the bid because Company F is potentially worth $30 million to Company X.

The Board of Directors of a listed company is considering the company's dividend/retentions policy.
The inflation rate in the economy is currently high and is expected to remain so for the foreseeable future.
The board are unsure what impact the high level of inflation might have on the dividend policy.
Which THREE of the following statements are true?

• A. Retained earnings for reinvestment will have to earn a return in excess of the inflation level.
• B. The impact of inflation on the cash flows should be considered when formulating the dividend policy.
• C. Consideration should be given to the fact that shareholders will have a desire for real growth in dividend.
• D. The high inflation rate does not need to be considered when determining the dividend policy.
• E. In periods of high inflation 100% of earnings should always be paid out as dividends so that shareholders can protect their wealth against the impact of inflation.