CIMA F3 Exam With Confidence Using Practice Dumps

A company is considering either directly exporting its product to customers in a foreign country or setting up a subsidiary in the foreign country to manufacture and supply customers in that country.

Details of each alternative method of supplying the foreign market are as follows:

There is an import tax on product entering the foreign country of 10% of sales value.

This import duty is a tax-allowable deduction in the company's domestic country.

The exchange rate is A$1.00 = B$1.10

Which alternative yields the highest total profit after taxation?

Company C has received an unwelcome takeover bid from Company P.

Company P is approximately twice the size of Company C based on market capitalisation.

Although the two companies have some common business interests, the main aim of the bid is diversification for Company P.

The offer from Company P is a share exchange of 2 shares in Company P for 3 shares in Company C.

There is a cash alternative of $5.50 for each Company C share.

Company C has substantial cash balances which the directors were planning to use to fund an acquisition.

These plans have not been announced to the market.

The following share price information is relevant. All prices are in $.

Which of the following would be the most appropriate action by Company C's directors following receipt of this hostile bid?

Company WWW is identical in all operating and risk characteristics to Company ZZZ. but their capital structures differ. Company WWW and Company ZZZ both pay corporate income tax at 20%

Company WWW has a gearing ratio (debt: equity) of 1:3 Its pre-tax cost of debt is 6%.

Company ZZZ Is all-equity financed. Its cost of equity is 15%

What is the cost of equity tor Company WWW?