Online Access Free F3 Practice Test

A venture capitalist invests in a company by means of buying:
* 9 million shares for $2 a share and
* 8% bonds with a nominal value of $2 million, repayable at par in 3 years' time.
The venture capitalist expects a return on the equity portion of the investment of at least 20% a year on a compound basis over the first 3 years of the investment.
The company has 10 million shares in issue.
What is the minimum total equity value for the company in 3 years' time required to satisify the venture capitalist's expected return?
Give your answer to the nearest $ million.

Which THREE of the following statements are true of a money market hedge?

• A.They offer roughly the same outcome as a forward contract.
• B.They may be a little more flexible in comparison to a forward contract.
• C.They are easy to set up.
• D.They leave the company exposed to currency risks.
• E.They are more complex than forward contracts.

A company based in the USA has a substantial fixed rate borrowing at an interest rate of 3.5% and wishes to swap a part of this to a floating rate to take advantage of reducing interest rates Its bank has quoted swap rates of 3 4%-3 5% against 12-month USD risk-free rate.
What is the overall interest rate achieved by the company under this borrowing plus swap combination?

• A.12-month USD risk-free rate plus 0.1% (where 0.1% = the fixed rate of 3.5% minus the swap rate of 3.4%)
• B.12-month USD risk-free rate
• C.12-month USD risk-free rate minus 0.1% (where 0.1% = the fixed rate of 3.6% minus the swap rate of 3.4%)
• D.Unchanged at 3.60% as this is the same as the swap rate

A listed company follows a policy of paying a constant dividend. The following information is available:
* Issued share capital (nominal value $0.50) $60 million
* Current market capitalisation $480 million
The shareholders are requesting an increased dividend this year as earnings have been growing. However, the directors wish to retain as much cash as possible to fund new investments. They therefore plan to announce a
1-for-10 scrip dividend to replace the usual cash dividend.
Assuming no other influence on share price, what is the expected share price following the scrip dividend?
Give your answer to 2 decimal places.

A company has:
* A price/earnings (P/E) ratio of 10.
* Earnings of $10 million.
* A market equity value of $100 million.
The directors forecast that the company's P/E ratio will fall to 8 and earnings fall to $9 million.
Which of the following calculations gives the best estimate of new company equity value in $ million following such a change?

• A.
• B.
• C.
• D.