Deal of The Day! Hurry Up, Grab the Special Discount - Save 25% - Ends In 00:00:00 Coupon code: SAVE25
Welcome to Pass4Success

- Free Preparation Discussions
Mail Us support@pass4success.com
Location US
Mob_nav_barsMENU

CIMAPRA19-F03-1 Exam - Topic 6 Question 122 Discussion

A company's Board of Directors is assessing the likely impact of financing future new projects using either equity or debt.The directors are uncertain of the effects on key variables.Which THREE of the following statements are true?
D) Debt finance will increase the cost of equity. and E) Equity finance will reduce the overall financialrisk. and F) Equity finance will increase pressure to pay a higher total future dividend.
A) The choice between using either equity or debt will have no impact on the amount of corporate income tax payable.
B) Retained earnings has no cost, and is therefore the cheapest form of equity finance.
C) Debt finance is always preferable to equity finance.

CIMAPRA19-F03-1 Exam - Topic 6 Question 122 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam
Question #: 122
Topic #: 6
[All CIMAPRA19-F03-1 Questions]

A company's Board of Directors is assessing the likely impact of financing future new projects using either equity or debt.

The directors are uncertain of the effects on key variables.

Which THREE of the following statements are true?

Show Suggested Answer Hide Answer
Suggested Answer: D, E, F

by Elinore at Apr 02, 2026, 10:33 AM

Limited Time Offer

25%

Off

Get Premium CIMAPRA19-F03-1 Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

0/2000 characters
Submit Cancel
Eva
7 hours ago
I think A is false. Debt affects tax due to interest deductions.
upvoted 0 times
...
Leota
5 days ago
B) no cost for retained earnings? Sounds too good to be true!
upvoted 0 times
...
Stephane
11 days ago
F) totally agree, equity brings dividend pressure.
upvoted 0 times
...
Noble
16 days ago
C) really? Debt isn't always better!
upvoted 0 times
...
Leonie
2 months ago
D) is true, debt does raise equity costs.
upvoted 0 times
...
Tran
2 months ago
A) is definitely false, tax impacts are real.
upvoted 0 times
...
Ines
3 months ago
D makes sense to me because if a company takes on more debt, it can increase the risk for equity holders, leading to a higher cost of equity.
upvoted 0 times
...
Wava
3 months ago
C sounds too absolute; I recall that debt isn't always preferable due to risks involved.
upvoted 0 times
...
Wynell
3 months ago
I’m not sure about B; I thought retained earnings do have an opportunity cost associated with them.
upvoted 0 times
...
Kathrine
4 months ago
I remember studying that debt can actually affect tax liabilities, so A seems incorrect.
upvoted 0 times
...

Save Cancel