CIMA F3 Exam With Confidence Using Practice Dumps

The table below shows the forecast for a company's next financial year:

The forecast incorporates the following assumptions:

   • 25% of operating costs are variable

   • Debt finance comprises a $400 million fixed rate loan at 5%

   • Corporate income tax is paid at 25%

The company plans to do the following next year from the forecast earnings on the assumption that earnings will be equivalent to free cash flow: 

   • Pay a total dividend of $20 million

   • Invest $40 million in new projects

What is the maximum % reduction in operating activity that could occur next year before the company's dividend and investment plans are affected?

Give your answer to the nearest 0.1%.

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 company generates and distributes electricity and gas to households and businesses. 

Forecast results for the next financial year are as follows:

The Industry Regulator has announced a new price cap of $1.50 per Kilowatt. 

The company expects this to cause consumption to rise by 10% but costs would remained unaltered. 

The price cap is expected to cause the company's net profit to fall to: