100% Free CIMA CIMAPRA19-F03-1-ENG Practice Test Questions and Answers 2026

An analyst has valued a company using the free cash flow valuation model.The analyst used the following data in determining the value: • Estimated free cashflow in 1 year's time = $100,000 • Estimated growth in free cashflow after the first year = 5?ch year indefinitely • Appropriate cost of equity = 10%The result produced by the analyst was as follows:Value of equity = $100,000 (1+0.05)/0.10 = $1,050,000The analyst made a number of errors in determining the value. By how much has the analyst undervalued the company? 

TU has relatively few tangible assets and is dependent for profits and growth on the high-value individuals it employs. Which of the following statements best explains why the net asset valuator method’s considered unstable for TU? 

A listed company in a high technology industry has decided to value its intellectual capital using theCalculated Intangible Value method (CIV).Relevant data for the company: • Pays corporate income tax at 30% • Cost of equity is 9%, pre-tax cost of debt is 7% and the WACC is 8%• The value spread has been calculated as $26 millionCalculate the CIV for the company.

Extracts from a company's profit forecast for the next financial year as follows:Since preparing the forecast, the company has decided to return surplus cash to shareholders by a sharerepurchase arrangement.The share repurchase would result in the company purchasing 20% of the 1,250 million ordinary sharescurrently in issue and canceling them.Assuming the share repurchase went ahead, the impact on the company's forecast earnings per share will be anincrease of: 

Company W has received an unwelcome takeover bid from Company B. The offer is a share exchange of 3shares in Company B for 5 shares in Company W or a cash alternative of $5.70 for each Company W share.Company B is approximately twice the size of Company W based on market capitalisation. Although the twocompanies have some common business interested the main aim of the bid is diversification for Company B.Company W 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.Which of the following would be the most appropriate action by Company W's directors following receipt ofthis hostile bid?