CIMA F3 Exam With Confidence Using Practice Dumps

13%1. De-gear GGG’s equity beta to get its asset betaGGG’s data:Equity beta βe=2.4\beta_e = 2.4βe​=2.4Gearing D/E=1D/E = 1D/E=1 (market values)Tax rate T=20%T = 20\%T=20%Formula:βa=βe1+(1−T)DE\beta_a = \frac{\beta_e}{1 + (1-T)\frac{D}{E}}βa​=1+(1−T)ED​βe​​ βa=2.41+0.8×1=2.41.8=43≈1.33\beta_a = \frac{2.4}{1 + 0.8 \times 1} = \frac{2.4}{1.8} = \frac{4}{3} \approx 1.33βa​=1+0.8×12.4​=1.82.4​=34​≈1.33 This asset beta represents the business risk of electric scooters.2. Re-gear for ART’s capital structureART is and will remain all-equity financed, so for the project:βproject=βa≈1.33\beta_{\text{project}} = \beta_a \approx 1.33βproject​=βa​≈1.33 3. Use CAPM to get the discount rateGiven:Risk-free rate Rf=5%R_f = 5\%Rf​=5%Market risk premium (Rm−Rf)=6%(R_m - R_f) = 6\%(Rm​−Rf​)=6%Required return=Rf+βproject(Rm−Rf)=5%+1.33×6%=5%+8%=13%\text{Required return} = R_f + \beta_{\text{project}}(R_m - R_f) = 5\% + 1.33 \times 6\% = 5\% + 8\% = 13\%Required return=Rf​+βproject​(Rm​−Rf​)=5%+1.33×6%=5%+8%=13% Recommended discount rate (nearest whole %): 13%

8, 8000000Comprehensive and Detailed Step-by-Step Explanation (Based on CIMA F3: Financial Strategy Principles):In CIMA F3, the valuation of acquisition synergies is based on the principle that synergy equals the increase in combined firm value that arises because the acquiring company can improve the target firm's performance or efficiency. One of the core valuation tools taught in the syllabus is the Price/Earnings (P/E) multiple method, where the value of a company is determined by multiplying its earnings by the appropriate industry or company-specific P/E ratio.The scenario states that Company A believes it can improve Company B’s performance sufficiently so that B’s earnings should attract Company A’s higher P/E ratio rather than its own lower ratio. This is a classic example of an “earnings uplift synergy,” discussed frequently in F3 under the section covering mergers, acquisitions, and revaluation synergies.Step 1 — Revalue Company B using Company A's P/E ratioCompany B’s current earnings:-Exhibit (a073f387-824e-4a5b-a1c6-4d72404346a7)-Company A’s P/E ratio (to be applied):Expected post-acquisition value of Company B:Step 2 — Compare with current market value of Company BCurrent market capitalisation of Company B:-Exhibit (bee41617-72c3-4f61-b9c2-dc66ad2e046d)-Step 3 — Calculate synergySynergy represents the additional value created above B’s current standalone value:-Exhibit (ddc25633-cc16-4412-9577-0f5b4421b393)-This aligns with CIMA F3’s framework: synergy is calculated as the difference between the post-acquisition value (based on improved performance and higher multiples) and the pre-acquisition market value.