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Pass F3 Exam Guide

Page: 23 / 33
Total 435 questions

Financial Strategy Questions and Answers

Question 89

A company needs to raise $40 million to finance a project. It has decided on a right issue at a discount of 20% to its current market share price.

There are currently 20 million shares in issue with a nominal value of $1 and a market price of $10.00 per share.

Options:

A.

1 new share for every 25 existing shares

B.

1 new share for every 4 existing shares

C.

1 new share for every 5 existing shares

D.

1 new share for every 20 existing shares

Question 90

The Board of Directors of a listed company have decided that it needs to increase its equity capital to ensure it is in a more stable financial position.

The shareholder profile is a mix of institutional and individual small shareholders.

The board is considering either:

   • A scrip dividend 

   • A zero dividend

 

Which THREE of the following would be considered disadvantages of a scrip dividend compared to a zero dividend?

Options:

A.

A scrip dividend results in distributable reserves being moved to non-distributable reserves.

B.

A scrip dividend will dilute the control of current shareholders.

C.

A scrip dividend results in more shares in issue which will create an expectation for future dividends.

D.

There will be company secretarial and additional administration involved with a scrip dividend.

E.

A scrip issue may give shareholders the impression that they are receiving something of value.

Question 91

A company in country T is considering either exporting its product directly to customers in country P or establishing a manufacturing subsidiary in country P.

The corporate tax rate in country T is 20% and 25% tax depreciation allowances are available

Which TIIRCC of the following would be considered advantages of establishing a subsidiary in country T?

Options:

A.

The corporate tsx rate in country P is 40%.

B.

There are restrictions on companies wishing to remit profit from country P

C.

Year 1 tax depreciation allowances of 100% are available in country P.

D.

There is a double tax treaty between country T and country P.

E.

There are high customs cuties payable of products entering country P.

Question 92

Company AAB is located in country A whose currency is the AS It has a subsidiary, BBA, located m country B that has the BS as its currency AAB has asked BBA to pay BS40 million surplus funds to AAB to assist with a planned new capital investment in country A The exchange rate today is AS1 = BS3

Tax regimes

• Company BBA pays withholding tax of 25% on all cash remitted to the parent company

• Company AAB pays tax of 10% on at cash received from its subsidiary

How much will company AAB have available for investment after receiving the surplus funds from BBA?

Options:

A.

A$ 12 million

B.

A$ 9 million

C.

A$ 81 million

D.

A$ 27 million

Page: 23 / 33
Total 435 questions