CIMA F3 Exam With Confidence Using Practice Dumps

The Board of Directors of a listed company have decided that it needs to increase its equity capital to ensure it is in a more stable financial position.

The shareholder profile is a mix of institutional and individual small shareholders.

The board is considering either:

   • A scrip dividend 

   • A zero dividend

Which THREE of the following would be considered disadvantages of a scrip dividend compared to a zero dividend?

A company is considering whether to lease or buy an asset.

The following data applies:

   • The bank will charge interest at 7.14% per annum

   • The asset will cost $1 million

   • Tax-allowable depreciation is available on a straight line basis over 5 years

   • There is no residual value

   • Corporate tax is paid at 30% in the year when the profit is earned

What is the NPV of the buy option?

Give your answer to the nearest $000.

$ ?  

A company is owned by its five directors who want to sell the business.  

Current profit after tax is $750,000.  

The directors are currently paid minimal salaries, taking most of their incomes as dividends.

After the company is sold, directors' salaries will need to be increased by $50,000 each year in total.

A suitable Price/Earnings (P/E) ratio is 7, and the rate of corporate tax is 20%.

What is the value of the company using a P/E valuation?