Free F3 Exam Braindumps
F3 Financial Strategy Questions 57–64 (page: 9)

The International Integrated Reporting Council (IIRC) was formed in August 2010 and brings together a cross-section of representatives from a wide variety of business sectors.  The primary purpose of the IIRC's framework is to help enable an organsation to communicate how it:

A company has in a 5% corporate bond in issue on which there are two loan covenants.   
* Interest cover must not fall below 3 times   
* Retained earnings for the year must not fall below $3.5 million The Company has 200 million shares in issue. The most recent dividend per share was $0.04. The Company intends increasing dividends by 10% next year.
Financial projections for next year are as follows:

Advise the Board of Directors which of the following will be the status of compliance with the loan covenants next year?

A company's Board of Directors is assessing the likely impact of financing future new projects using either equity or debt. The directors are uncertain of the effects on key variables.
Which THREE of the following statements are true?

A company is currently all-equity financed. The directors are planning to raise long term debt to finance a new project. The debt:equity ratio after the bond issue would be 40:60 based on estimated market values.
According to Modigliani and Miller's Theory of Capital Structure without tax, the company's cost of equity would:

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?

A company is deciding whether to offer a scrip dividend or a cash dividend to its shareholders.  Although the company has excellent long-term growth prospects, it is experiencing short-term profit and cash flow problems.
Which of the following statements is most likely to be a reason for choosing the scrip dividend?

A venture capitalist invests in a company by means of buying:   
* 9 million shares for $2 a share and   
* 8% bonds with a nominal value of $2 million, repayable at par in 3 years' time.  The venture capitalist expects a return on the equity portion of the investment of at least 20% a year on a compound basis over the first 3 years of the investment.
The company has 10 million shares in issue.
What is the minimum total equity value for the company in 3 years' time required to satisify the venture capitalist's expected return?
Give your answer to the nearest $ million.
$   million.   

A consultancy company is dependent for profits and growth on the high value individuals it employs. The company has relatively few tangible assets.
Select the most appropriate reason for the net asset valuation method being considered unsuitable for such a company.