CIMA F3 Exam With Confidence Using Practice Dumps

PBIT = $4m

Interest on loan = 10% × $10m = $1m

Profit before tax = $3m

Tax at 20% → earnings after tax = $3m × 0.8 = $2.4m

Use the P/E multiple for the food-processing sector (10x), as this best reflects the business risk and industry.

Equity value = $2.4m × 10 = $24m

Answer: D. $24 million

A – “X may be able to sell the receipts forward.”

If X invoices in customers’ currencies, it will receive known foreign-currency amounts and can hedge the exchange risk using forward contracts. So this is correct.

D – “The overseas customers may have difficulty obtaining X's home currency … so the proposal may increase sales.”

Right now, customers must obtain X’s currency to pay, bearing FX costs and risk. If X invoices in their local currency, buying becomes easier and could boost sales. So D is correct.

Why the others are wrong:

B: Effective sales price might go up or down; it isn’t necessarily lower.

C: Invoicing in customers’ currency removes certainty for X in home-currency terms unless hedged.

E: That describes the current position (customers bear the risk), not the proposed change.

Current price = $5.00

Rights discount = 20% → Issue price = 5 × 0.8 = $4.00

Funds required = $20m

Number of new shares:

20m4=5m shares\frac{20\text{m}}{4} = 5\text{m shares}420m​=5m shares

Currently 20m shares in issue, so ratio:

5m20m=14\frac{5\text{m}}{20\text{m}} = \frac{1}{4}20m5m​=41​

So terms = 1 new share for every 4 existing → A.