CIMA F3 Exam With Confidence Using Practice Dumps

C. Helps access to wider sources of finance – A key benefit of listing is easier access to equity and sometimes cheaper debt.

D. Provides an exit route for the founders – Listing 70% allows them to sell down and realise value.

E. Increases the profile and reputation of the business – Public companies usually gain visibility, credibility, and brand recognition.

A is doubtful (agency conflicts can increase with dispersed ownership), and B (higher dividends) is not a guaranteed benefit of listing.

We want methods that give the value of equity, not the value of the whole entity.

A. D₁ / (kₑ – g) → Gordon growth dividend model = value of equity (share value). ✅

B. Total earnings × P/E → market capitalisation = equity value. ✅

C. Free cash flows to all investors discounted at WACC → enterprise / firm value (equity + debt). ❌

D. Free cash flows to equity discounted at cost of equity → equity value. ✅

E. NCA + CA − CL → value of net assets before deducting long-term debt, i.e. value of the business to all capital providers, not just equity. ❌

So correct choices: A, B, D.

Bond alone: pay 6% on $100m = 6m per year.

Add swap (receive 5% fixed, pay Libor + 1):

Net rate = 6% (bond) − 5% (received) + (Libor + 1%).

With Libor = 4% → 6 − 5 + (4 + 1) = 5% total.

Interest cost falls from 6% to 5% → 1% reduction.

Answer: B. Fall by 1%.