CIMA F3 Exam With Confidence Using Practice Dumps

A company is planning to issue a 5 year $100 million bond at a fixed rate of 6%.

It is also considering whether or not to enter into a 10 year $100 million swap to receive 5% fixed and pay Libor + 1% once a year.

The company predicts that Libor will be 4% over the life of the 5 years.

What is the impact of the swap on the company's annual interest cost assuming that the Libor prediction is correct?  

A private company was formed five years ago and is currently owned and managed by its five founders. The founders, who each own the same number of shares have generally co-operated effectively but there have also been a number of areas where they have disagreed

The company has grown significantly over this period by re-investing its earnings into new investments which have produced excellent returns

The founders are now considering an Initial Public Offering by listing 70% of the shares on the local stock exchange

Which THREE of the following statements about the advantages of a listing are valid?

At the last financial year end, 31 December 20X1, a company reported:

The corporate income tax rate is 30% and the bank borrowings are subject to an interest cover covenant of 4 times. 

The results are presently comfortably within the interest cover covenant as they show interest cover of 8.3 times. The company plans to invest in a new product line which is not expected to affect profit in the first year but will require additional borrowings of $20 million at an annual interest rate of 10%.

What is the likely impact on the existing interest cover covenant?