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 7 Question 45 Discussion

Company P is a largeunlisted food-processing company.Its currentprofitbefore interest and taxationis$4 million, which it expects to be maintainablein the future.It has a $10 million long-termloan on which it pays interest of 10%.Corporate tax ispaid at the rate of 20%.The following information on P/E multiples is available:Which of the following is the best indication of theequityvalue of Company P?
D) $24 million
A) $80 million
B) $40 million
C) $48 million

CIMAPRA19-F03-1 Exam - Topic 7 Question 45 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam
Question #: 45
Topic #: 7
[All CIMAPRA19-F03-1 Questions]

Company P is a largeunlisted food-processing company.

Its currentprofitbefore interest and taxationis$4 million, which it expects to be maintainablein the future.

It has a $10 million long-termloan on which it pays interest of 10%.

Corporate tax ispaid at the rate of 20%.

The following information on P/E multiples is available:

Which of the following is the best indication of theequityvalue of Company P?

Show Suggested Answer Hide Answer
Suggested Answer: D

by Denise at May 09, 2022, 07:49 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
Judy
10 months ago
Totally agree, $40 million is a solid estimate!
upvoted 0 times
...
Gail
10 months ago
Wait, how can they maintain that profit with a $10 million loan?
upvoted 0 times
...
Vivan
11 months ago
$48 million seems too high for an unlisted company.
upvoted 0 times
...
Lettie
11 months ago
I think $40 million sounds about right.
upvoted 0 times
...
Jennifer
11 months ago
Company P has a profit of $4 million and a $10 million loan.
upvoted 0 times
...
Alva
11 months ago
Okay, for this type of question, I'd want to consider whether the coffee mug has a useful life beyond a short period and if it meets the criteria to be recorded as an asset. Since it's promotional, I'm leaning towards True.
upvoted 0 times
...
Sharee
11 months ago
Based on the details provided, I think option D is the way to go. Creating a hold code that the CSR can add and remove as needed seems like the most flexible and straightforward solution. I feel pretty confident about this choice.
upvoted 0 times
...
Maryln
11 months ago
I thought it was MST, but I can't recall if that was just a guess from a practice quiz.
upvoted 0 times
...
Broderick
11 months ago
I'm pretty confident that the answer is B. Managed care plans typically use financial incentives like low copays to steer employees towards preferred providers, which helps control costs.
upvoted 0 times
...

Save Cancel