CIMA F3 Exam With Confidence Using Practice Dumps

Pre-acquisition:

Company X: earnings = $50m, P/E = 10 → value = 50 × 10 = $500m; shares = 100m → price = $5

Company Y: earnings = $15m, P/E = 10 → value = 15 × 10 = $150m; shares = 50m → price = $3

Combined earnings = 50 + 15 = $65m

Post-acquisition assumptions:

Earnings increase by 10% → 65 × 1.10 = $71.5m

Combined P/E remains 10 → total market value = 71.5 × 10 = $715m

We want X’s new share price to be 10% higher than $5 → target price = $5.50.

Share price = total value ÷ total X shares after issue:

5.50=715Total shares⇒Total shares=7155.5=130m5.50 = \frac{715}{\text{Total shares}} \Rightarrow \text{Total shares} = \frac{715}{5.5} = 130\text{m}5.50=Total shares715​⇒Total shares=5.5715​=130m

X currently has 100m shares, so must issue 30m new shares to Y’s shareholders.

Y has 50m shares → each Y share must get:

30m50m=0.6 X shares per Y share\frac{30m}{50m} = 0.6 \text{ X shares per Y share}50m30m​=0.6 X shares per Y share

Check options:

B: 3 X for 5 Y → 3/5 = 0.6 X per Y ✔

So that exchange ratio gives exactly 30m new X shares and hence a 10% increase in X’s share price.

Correct answer: B – 3 shares in Company X for 5 shares in Company Y.

IFRS 7 requires detailed disclosures about financial instruments and risk management, including currency risk, sensitivity analysis, and how those risks are managed. When these are published for the first time, investors may learn new information about:

The extent of US$ exposure (40% export sales), and

The quality of risk management (hedging, matching, etc.).

Efficient market theory (covered in F3) says prices adjust to new, relevant information. That new information could make investors more confident (if risks are well managed) or more concerned (if risks are high and poorly managed). So the share price could either increase or decrease, depending on the market’s reaction.

That matches option D.

Options A and C assume a one-way direction (always up or always down), which is unrealistic. B is wrong because segmental analysis does not normally give the same detailed, risk-focused disclosure as IFRS 7.

Regulations likely to hurt ZZZ most:

A. Minimum staff-to-client ratio – raises operating costs, particularly for a large operator.

B. Maximum price controls – directly restrict ZZZ’s ability to charge premium prices.

C. Monopoly controls forcing disposals – may force ZZZ to sell homes and shrink.

D is a one-off hit, and E is less of a threat to a high-quality provider.