CIMA Exam CIMAPRA19-F03-1 Topic 5 Question 64 Discussion

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

Question #: 64
Topic #: 5

A company has a cash surplus which it wishes todistributeto shareholders by a share repurchase rather than paying a special dividend.

WhichTHREEof the following statementsare correct?

AThe payment of a special dividend could raise shareholders' expectations of similar distributions in the future, unlike a share repurchase.

BThe share repurchase could send a negative signal to shareholders as it could be interpreted as a failure of management to find suitable investment opportunities.

CDetermination of the repurchase price will be easy as shareholders will insist on receiving the open market price.

DDifferent tax regimes could result in shareholders having a preference for a share repurchase due to the often more preferential tax treatment of capital gains.

EThe share repurchase, if approved by the shareholders, will be binding on all of the company's shareholders.

Show Suggested Answer

Suggested Answer: C

by Tammara at Feb 04, 2023, 03:58 AM

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Ma

3 days ago

I think option A is correct because shareholders may expect more dividends in the future.

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