CIMA F3 Exam With Confidence Using Practice Dumps

A company has a covenant on its 5% long-term bond, stipulating that its retained earnings must not fall below $2 million.

The company has 100 million shares in issue.

Its most recent dividend was $0.045 per share. It has committed to grow the dividend per share by 4% each year.

The nominal value of the bond is $60 million. It is currently trading at 80% of its nominal value.

Next year's earnings before interest and taxation are projected to be $11.25 million.

The rate of corporate tax is 20%.

If the company increases the dividend by 4%, advise the Board of Directors if the level of retained earnings will comply with the covenant?

A large, listed company in the food and household goods industry needs to raise $50 million for a period of up to 6 months.

It has an excellent credit rating and there is almost no risk of the company defaulting on the borrowings. The company already has a commercial paper programme in place and has a good relationship with its bank.

Which of the following is likely to be the most cost effective method of borrowing the money?

The long-term prospects for inflation in the UK and the USA are 1% and 4% per annum respectively.

The GBP/USD spot rate is currently GBP/USD1.40

Using purchasing power parity theory, what GBP/USD spot rate would you expect to see in six months’ time?