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

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?
A) The Weighted Average Cost of Capital and C) The interest cover and F) The number of shares in issue
B) The cost of equity
D) Next year's dividend per share
E) The gearing, based on book value (debt (debt + equity))

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

Actual exam question for CIMA's CIMAPRA19-F03-1 exam
Question #: 17
Topic #: 4
[All CIMAPRA19-F03-1 Questions]

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?

Show Suggested Answer Hide Answer
Suggested Answer: A, C, F

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

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Sherrell
10 months ago
Gearing will definitely decrease, that's a given!
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Leontine
10 months ago
Interest cover should definitely drop with more debt.
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Sherly
11 months ago
Wait, how can they maintain the same total dividend with fewer shares?
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Jarod
11 months ago
Totally agree, share buybacks usually boost stock prices!
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Sharee
11 months ago
The cost of equity will likely decrease.
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Gayla
11 months ago
I'm a little confused by this question. The deployment is forecasted to need 256 GB, but the options include 512 GB, 1 TB, and 2 TB. Does that mean the minimum amount that can be allocated is actually higher than 256 GB? I'll have to re-read the question carefully and think about it some more.
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Raul
11 months ago
This seems like a pretty straightforward Scrum question. I'd probably start by reviewing the Scrum framework and the responsibilities of the Scrum Master.
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