Free CIMA CIMAPRA19-F03-1 Exam Practice Questions & Explanations

Last updated on: Sep 6, 2026
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Question 1

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?

Answer Options
Correct Answer: D
Question 2

A company plans to raise $12 millionto finance an expansion project using a rights issue.

Relevant data:

* Shares will be offered at a 20% discountto the present market price of $15.00 per share.

* There are currently 2 million shares in issue.

* The project is forecast to yield a positive NPV of $6 million.

What is the yield-adjusted Theoretical Ex-Rights Price following the announcement of the rights issue?

Answer Options
Correct Answer: A
Explanation

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Question 3

An unlisted company wishes to obtain an estimated value for its shares in anticipation of a private sale of a large parcel of shares.

Relevant data for the unlisted company:

* It has a residual dividend policy.

* It has earnings that are highly sensitive to underlying economic conditions.

* It is a small business in a large industry where there are listed companies but there are none with a similar capital structure.

The company intends to base valuations on the cost of equity of a proxy company after adjusting for any differences in capital structure where appropriate.

Which of the following methods is likely to give the most accurate equity value for this unlisted company?

Answer Options
Correct Answer: A
Question 4

A company with a market capitalisation of S50million is considering raising $1 million debt to fund a new 10-year capital investment protect

The value of this issue is considered to be small in comparison to the company's market capitalisation

The company is considering whether to raise the debt finance by either a "bond private placing' or a 'public bond issue.

Which THREE of the following statements are correct?

Answer Options
Correct Answer: A, E
Question 5

A company's Board of Directors is consideringraisinga long-term bank loan incorporatinga number of covenants.

TheBoard members are unsure what loan covenants involve.

WhichTHREEof the following statementsregardingloan covenants are true?

Answer Options
Correct Answer: A, C, E