F3 Exam Dumps : Financial Strategy

Once Division B is sold, Division A becomes heavily reliant on B as a major external customer. If the new owner reduces purchases or switches supplier, Division A’s volumes and viability are at risk. That makes:

C. Division A's going concern is highly dependent on its relationship with Division B – the main risk.

CIMA F3 links the cost of debt to the tax shield created by the tax deductibility of interest. The effective cost of servicing debt to a company is therefore the post-tax cost of debt, commonly expressed as kd(1−T)k_d(1-T)kd​(1−T). This makes statement C correct: when evaluating financing decisions and WACC, the company benefits from interest tax relief, so the relevant servicing cost is after tax. Statement A is also treated as correct in the standard F3 exam context: zero-coupon debt pays no periodic coupon interest, so there are no regular interest payments generating the conventional annual tax-deductible interest expense and therefore the familiar tax-shield effect on “interest payments” is not obtained in the same way (i.e., the typical coupon-based shield is eliminated). Statement B is incorrect because the size of the tax shield depends on the tax rate; if corporation tax changes, the value of the tax relief changes. Statement D is incorrect because if corporation tax rates rise, the tax shield from deductible interest would increase, not reduce (a higher tax rate increases the tax saving per dollar of interest). Hence the two correct statements are A and C.

The Framework identifies six capitals: financial, manufactured, intellectual, human, social & relationship, and natural. From the options given, those that match are:

Manufactured ✅

Human ✅

Financial ✅

Answer: A, D, E