Free Access CIMA.CIMAPRA19-F03-1.v2026-02-23.q300 Practice Test (Page 58)

Question 281

Company A is planning to acquire Company B.
Company A's managers think they can improve the performance of Company B to the extent that its own P/E ratio should be applied to Company B's earnings.
Relevant Data:

What is the expected synergy if the acquisition goes ahead?
Give your answer to the nearest $ million.

Question 282

A company's latest accounts show profit after tax of $20.0 million, after deducting interest of $5.0 million. The company expects earnings to grow at 5% per annum indefinitely.
The company has estimated its cost of equity at 12%, which is included in the company WACC of 10%.
Assuming that profit after tax is equivalent to cash flows, what is the value of the equity capital?
Give your answer to the nearest $ million.

Question 283

Company A needs to raise AS500 mi lion to invest in a new project and is considering using a pub ic issue of bonds to finance the investment.
Which THREE of the following statements-relating to this bond issue are true?

A.Bonds issues in the corporate debt market are underwritten.

B.The largest issuer of bond i3 the government.

C.Purchasing bonds in the capital markets enables entities to borrow large amounts of finance.

D.The bond market is unregulated making it easier to raise finance

E.A company must be listed before it can issue bones.

Question 284

Which THREE of the following statements about stock market listings are correct?

A.The reporting requirements for listed companies are more onerous than those for private companies

B.When seeking a listing to raise capital companies typically must ensure they include any costs of underwriting shares they need to issue.when determining the number of

C.Listed companies may be viewed more favorably by suppliers and consequently granted more generous payment terms than private companies

D.The increased scrutiny that applies to listed companies makes them less attractive to investors.

E.A prerequisite to obtaining a listing is that a public company must reregister as a private company first.

Question 285

A company plans to acquire new machinery.
It has two financing options; buy outright using a bank loan, or a finance lease.
Which of the following is an advantage of a finance lease compared with a bank loan?

A.The interest rate offered might be more favourable because the lessor has the security of the asset.

B.It is "off-balance sheet" and will not affect the company's gearing.

C.The lessor provides maintenance of the asset.

D.Tax depreciation allowances may be passed on to the company by the lessor.

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