CIMAPRO19-F03-1-ENG Exam: Absolutely Free Online Practice

Free CIMA CIMAPRO19-F03-1-ENG Exam Questions

An entity prepares financial statements to 31 December each year. The following data applies:

• The entity purchased some inventory for $400,000.

• In order to protect the inventory against adverse changes in fair value the entity entered into a futures

contract to sell the inventory for a fixed price on 31 January 20X1.

• The entity designated this contract as a fair value hedge of the value of the inventory.

31 December 20X0

• The inventory had a fair value of $480,000 and the futures contract had a fair value of $75,000 (a financial

liability).

What will be the impact on the statement of profit or loss and other comprehensive income for the year ended

31 December 20X0 in respect of the change in the value of the inventory and the futures contract?

• $6 million market value of equity

• $4 million market value of debt

• WACC of 11.04%

• Corporate income tax rate of 20%

According to Modigliani and Miller's theory of capital structure with tax, what is the ungeared cost of equity?

A company is undertaking a lease-or-buy evaluation, using the post-tax cost of bank borrowing as the discount

Details of the two alternatives are as follows:

• To be financed by a bank loan

• Tax depreciation allowances are available on a reducing-balance basis

• Assets depreciated on a straight-line basis

• Maintenance to be paid by the lessee

• Tax relief available on interest payments and book depreciation

Which THREE of the following are relevant cashflows in the lease-or-buy appraisal?

bonds to finance the investment.

Which THREE of the following statements-relating to this bond issue are true?