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Exam Code: CIMAPRO19-F03-1-ENG
Exam Questions: 305
F3 Financial Strategy
Updated: 26 Nov, 2025
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Practicing : 1 - 5 of 305 Questions
Question 1

Company A is planning to acquire Company B at a price of $ 65 million by means of a cash bid.
Company A is confident that the merged entity can achieve the same price earnings ratio as that of Company
A.

3

What does Company A expect the value of the merged entity to be post acquisition?  

Options :
Answer: A

Question 2

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?

Options :
Answer: A,D

Question 3

A company based in Country D, whose currency is the D$, has an objective of maintaining an operating profit
margin of at least 10?ch year.
Relevant data:
 • The company makes sales to Country E whose currency is the E$. It also makes sales to Country F whose
currency is the F$.
 • All purchases are from Country G whose currency is the G$.
 • The settlement of all 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?

Options :
Answer: C

Question 4

The directors of a financial services company need to calculate a valuation of their company’s equity in
preparation for an upcoming initial Public Offering (IPO) of shares. At a recent board meeting they discussed
the various methods of business valuation.
The Chief Executive suggested using a Price-earing (P./E) method of valuation, but the finance Director
argued that a valuation based on forecast cash flows to equity would be more appropriate.
Which THREE of the following are advantages of valuation based on forecast cash flows to equity, compared
to a valuating using a price earnings methods?

Options :
Answer: A,C,D

Question 5

A company has:
 • 10 million $1 ordinary shares in issue
 • A current share price of $5.00 a share
 • A WACC of 15%
The company holds $10 million in cash. No interest is earned on this cash.
It will invest this in a project with an expected NPV of $4 million.
In a semi-strong efficient stock market, which of the following is the most likely share price immediately after
the announcement of the new investment?

Options :
Answer: A

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