CIMA Exam CIMAPRA19-F03-1 Topic 4 Question 17 Discussion

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

Question #: 17
Topic #: 4

Acompany'sgearingis well below its optimal level and therefore it is considering implementing a share re-purchase programme.

This programme will be funded from the proceeds of aplannednew long-term bond issue.

Its financial projectionsshow no change to next year'sexpectedearnings.

As a result, the companyplans to pay the same total dividend in future years.

If the sharere-purchase is implemented, whichTHREEof the following measures are most likely to decrease?

AThe Weighted Average Cost of Capital

BThe cost of equity

CThe interest cover

DNext year's dividend per share

EThe gearing, based on book value (debt (debt + equity))

FThe number of shares in issue

Show Suggested Answer

Suggested Answer: A, C, F

by Cecil at May 07, 2022, 06:46 AM

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