CIMA Exam CIMAPRA19-F03-1 Topic 5 Question 103 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam

Question #: 103
Topic #: 5

Thetable below shows theforecast for a company's next financial year:

The forecast incorporates the following assumptions:

* 25% of operating costs are variable

* Debt finance comprises a $400 million fixed rate loan at 5%

* Corporateincometax is paid at 25%

The company plans to do the following next year from the forecast earnings on the assumption that earnings will be equivalent to free cash flow:

* Pay a total dividend of $20 million

* Invest $40 million in new projects

What is themaximum % reduction inoperatingactivitythat could occurnext yearbefore the company's dividend and investment plans are affected?

Give your answer to the nearest 0.1%.

A4.8, 4.7, 4.9, 5.0, 4.6, 4.80, 4.70, 4.90, 5.00, 4.60%

B4.8, 4.7, 4.9, 5.0, 4.6, 4.80, 4.70, 4.90, 5.00, 3.60%

Show Suggested Answer

Suggested Answer: A, B, D

by Reed at Dec 10, 2024, 01:11 AM

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Almeta

28 days ago

I'd reduce my operating activity by 100% and just take a nap. Problem solved!

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Vincenza

30 days ago

Wait, so we're talking about operating activity and not, you know, other kinds of activity? Asking for a friend.

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Felix

1 months ago

4.6% - just call me Goldilocks, because this one feels just right!

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Rosendo

4 days ago

B) 3.6%

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Margret

17 days ago

A) 4.8

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Jenelle

1 months ago

5.0% is my final answer. I'm feeling confident about this one.

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Gracia

1 months ago

Ha! I tried to be a smart-aleck and picked 4.9%, but now I'm second-guessing myself. Oh well, can't win 'em all.

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Fletcher

1 months ago

4.7% is my guess. The question seems straightforward, but I want to double-check my workings.

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Renea

7 days ago

I'm confident it's 4.7% based on the information provided.

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Charlene

16 days ago

I calculated it as 4.8%, but let me review my calculations.

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Julio

1 months ago

I think the answer is 4.7% too.

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Edelmira

2 months ago

4.8% seems a bit low to me. I think the maximum reduction in operating activity could be closer to 5.0%.

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Jade

5 days ago

Maybe it's better to go with the higher end to ensure the company's dividend and investment plans are not affected.

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Barbra

1 months ago

I think so too, 4.8% does seem a bit low considering all the factors involved.

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Lavonda

1 months ago

I agree, 5.0% seems more reasonable for the maximum reduction in operating activity.

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Jacob

2 months ago

I'm not sure, but I think a 4.7% reduction could also work without affecting the dividend and investment plans.

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Allene

2 months ago

I agree with An, a 4.8% reduction seems reasonable based on the assumptions.

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An

2 months ago

I think the maximum % reduction in operating activity could be 4.8%.

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