New IMA CMA-Strategic-Financial-Management Dumps & Questions Updated on 2023
Dumps to Pass your CMA-Strategic-Financial-Management Exam with 100% Real Questions and Answers
NEW QUESTION # 75
A company is considering investing £1 million for a new machine. The new machine is expected to generate
£450,000 incremental before-tax operating cash inflows and £100.000 in additional depreciation expense for each of the next ten years. The company uses the same depreciation assumptions tor book and tax purposes. If the company's income tax rate is 30%, what is the change in the yearly after-tax cash flow from operations if the company invests in the new machine?
- A. £295, 000
- B. £315,000
- C. £345, 000
- D. £245,000
Answer: C
NEW QUESTION # 76
A corporation's board of directors has just declared its next regular quarterly cash dividend. The record date for this dividend will occur
- A. before the ex-dividend date and after the payment date
- B. before the payment date and after the ex-dividend date
- C. after the ex-dividend date and after the payment date
- D. before the ex-dividend date and before the payment date
Answer: D
NEW QUESTION # 77
A capital budgeting analysis involves an initial investment of $500. The expected cash inflow in Year 1 is
$300, and the expected cash inflow in Year 2 is $350. Which one of the following equations can get the correct internal rate of return (IRR) of this project?
- A. $500 = $300/(1 + IRR) + $350/(1 + IRR)
- B. $0 = $300/(1 + IRR) + $350/11 + IRR)2
- C. $500 = $300/(1 + IRR) + $350/(1 + IRR)2
- D. -$500 = $300'(1 + IRR) + 5350/(1 + IRR)2
Answer: D
NEW QUESTION # 78
Each of the following describes a limitation of financial statement analysis except
- A. it Is difficult to compare one company with another even within the same industry due to differences in accounting principles used.
- B. financial statements may include significant estimated items which may distort results
- C. financial statement analysis can use more than one measure to examine the interrelationships among data
- D. financial statement analysis is based on historical costs rattier man current costs which can lead to distortions in measurement
Answer: C
NEW QUESTION # 79
An organization s sol of values and code or ethics is an important consideration in human resource decisions for each of the following reasons except
- A. failure to address the alignment or individual values and ethics with organizational expectations may have a negative impact on performance.
- B. lack of a communicated set of values may create confusion and conflict among employees
- C. an organization may not have a legal right to discharge a dishonest employee if such a code is not communicated
- D. employees not motivated to adhere to a set of values may impact relationships wan other entities doing Business e organization.
Answer: C
NEW QUESTION # 80
FumiSelf is a global manufacturer of consumer-assembled furniture with a business presence in nearly every country. The Vice President of Production was presented with the following information by the Vice President of Finance as of the end of the current quarter.
- A. Europe division is the most inefficient in managing its inventory
- B. African division is the most efficient in manage its inventory
- C. Asian division has the highest days' sales in inventory
- D. North American division has the lowest days' sales in Inventory.
Answer: A
NEW QUESTION # 81
Below is the income statement and balance sheet for a retail corporation.
What is the corporation's debt to total capital in year 2?
- A. 6%
- B. 71%
- C. 41%
- D. 19%
Answer: D
NEW QUESTION # 82
Custom Ceramics produces two hand-painted items a large bowl and a large platter. Relevant information for each of these items is shown below
- A. The company should produce only bowls because the sales price per Bowl is higher
- B. The company should produce only platters because the contribution margin per painting hour is higher
- C. The company should produce only bowls because the contribution margin per bowl is higher.
- D. The company should produce only platters because the variable cost per platter is lower
Answer: B
NEW QUESTION # 83
Explain now QDD's share repurchase plan would affect each of the following measures EPS, the degree of operating leverage, and the interest coverage ratio No calculations required Essay Quality Digital Design (QDD) Inc is a public-traded technology company Selected financial data of QDD for the prior year are as follows
QDD's stock was trading at $160 per share at the beginning of the yea: and at $176 per share by the end of the year. The company paid dividends of S5 per share. The company "s stock had a beta of 1 4 The stock market provided a total return of 12% last year, well above the 3% risk free rate of return QDD is considering the issuance of $200 million of bonds to fund the repurchase of $200 million of its stock.
QDD is evaluating the bond, including its term structure, maturity, and whether it should be callable obtaining the lowest coupon interest is an important objective of QDD. The CFO has estimated that sales for the current year would remain the same as last year and the new bond would add S12 million in annual interest payments.
Answer:
Explanation:
See the explanation for the answer.
Explanation
The share repurchase program will reduce the weighted average number of shares outstanding which is turn will increase the earning per share as the same income will be divided over a fewer number of shares It has no impact on the operating leverage and me .Merest cover ratio as it has nothing to do with cost and interest expense (therefore profitability) its an equity based transaction only
NEW QUESTION # 84
Below is the income statement and balance sheet for a retail corporation.
What is the corporation's return on equity in Year 2?
- A. 48%
- B. 26%
- C. 23%
- D. 39%
Answer: A
NEW QUESTION # 85
The best discount rate to the use for evaluate of investment opportunities is the
- A. opportunity cost of capital
- B. risk-free interest rate
- C. average market interest rate
- D. cost of the company's debt
Answer: A
NEW QUESTION # 86
Calculate Guda's marginal cost of capital- Show your calculations.
Apex Manufacturing lnc. (AMI) is a Canada-based company that manufactures a manufactures and unique part for aircrafts. It has few competitors in the market. The company is exposed to exchange rate risk because about 90% of its products are exported to the U.S, and most of its sales contracts are in U.S. dollars. AMI has the capacity to manufacture 1,500 units of the part per year. For the year just ended. AMI manufactured and sold 1,000 units. The operating results are shown below.
Recently, A new customer made a one-area order of 500 units of the part at $1.200 per unit. The CTO asked the controller to analyze this offer. AMI is considering adjusting its sales price next year in a recent meeting, the CFO suggested to use the market-based approach for pricing decisions, bat the controller insisted that the cost-based approach is more favorable to the company.
Answer:
Explanation:
See the explanation for the answer.
Explanation
it the company will adjust the selling price mat is if it reduces the profit margin mil decrease as more of its costs are fixed rather man variable in nature hence in has greater sensitivity to increase in sales price
NEW QUESTION # 87
When evaluating a capital Budgeting proposal, an advantage of using the payback method is that Bits process
- A. considers the time value of money.
- B. incorporates all of the project's cash inflows and outflows
- C. objectively determines if the proposal should be accepted or rejected.
- D. assesses the liquidity of the project.
Answer: D
NEW QUESTION # 88
Identify and describe two defenses Blue Moon could use if it does not wish to be acquired by Guda.
Essay
Food Depot Ltd, (FDL) is a privately-held company that provides catering services to airlines and operates several restaurant chains including fast food, casual dining, and fine dining restaurants, FDL has been profitable in recent years and has a very strong cash position. FDL's newest division. Food_TO-Go is an online meal ordering and delivery platform acquired by FDL two year ago.
In 20X7, sales for the entire company were $1 billion, with 50% of the business coming from the Airline Catering division. FDL is the country 's leading airline catering services provider and control 60% of the market share. However, the outlook of the airline catering industry is gloomy. The compound annual growth rate of the industry for the past five years was only 0.5% as airline networks have increasingly dropped catering on short domestic flights.
The Food-To-division only contribution 5% of FDL's total sales in 20X7 and is far behind in competing for marketing for market share of the online meal ordering and delivery industry, it is estimated that Food-To-Go's sales were only 20% of the industry leader's sales. However, the outlook for the online meal ordering and delivery services industry is bright. The compound annual growth rate of the industry since it started three years ago was 50%. It is estimated the rapid growth of the industry will continue in the foreseeable future.
Susan Willey, the head of Food-To-Go, does not agree that the Airline Catering division is the best-performing division in the company. Wiley argues that ber division bad the highest ROI in 20X7, and it deserves more capital finding. FDL's requested rate of return is 12%. The selected financial data for the Airline Catering division and Food-To-Go division in 20X7 are as follow (in $ millions)
Answer:
Explanation:
See the explanation for the answer.
Explanation
They can simply revalue their assets and hence ask for a higher price for their company or they are structure their financing structure by either issuing debts or reducing me equity by paying a special one off dividend.
NEW QUESTION # 89
Safety Strollers was recently sued by several people who alleged harmful and unsafe strollers. The management team was largely unconcerned about these lawsuits due to the apparent negligence of the plaintiffs However, a consumer grassroots effort Drought these dangers into the public eye and the management team now fears for their brand s reputation and the sales o' their products. The facts are staring to get distorted and some stores are electing to no longer carry this brand. This situation could best be considered a
- A. catastrophic force that could have been managed better with a robust crisis management plan
- B. hazard loss mal can be mitigated with liability insurance
- C. cost of doing business mat the company's m-house legal counsel will hand.
- D. financial risk managed through product diversification
Answer: B
NEW QUESTION # 90
Company A is concerned with its debt status and interested in analyzing how each one of the following activities might affect its to equity ratio. Assuming each activity is independent, which one of following activities is
- A. Acquiring a subsidiary and consolidating for year-end financial statements.
- B. Changing its inventory method from LIFO to weighted average.
- C. Purchase back some of its common stock during the year.
- D. Creating a separate entity to purchase a needed machine and leasing it from this entity.
Answer: A
NEW QUESTION # 91
A company currently offers all of its customers trade credit with terms of 1/15 net 45 of the following alternatives which would not Increase the company's average collection period from its current level?
- A. Ill and Iv only.
- B. III only
- C. I and II only
- D. I only.
Answer: C
NEW QUESTION # 92
Harris Wholesale Grocery Company has gross sales per year of $7 million and grants credit terms to its customers of 2/5. net 15 As a result. 60% of customers pay on the discount date 20% pay on the net due date, and 20% pay on average 10 days after the due date Assuming that sales are uniform throughout the year and using a 360-day year In the calculation what is the approximate annual amount of discount that Hams customers are allowed to take?
- A. $140, 000
- B. $84,000
- C. $210,000
- D. $28,000
Answer: A
NEW QUESTION # 93
The production process of a company s main product yields a by-product Production costs or $700,000 are incurred during this process and $300,000 m additional costs are incurred to finalize the main product. The by-product can be sold for $200 000 without further processing A manager proposed the conversion of the by-product into another product that would cost $100,000 and generate revenue of $250,000. When deciding on this proposal the company should
- A. evaluate whether other nonfinancial factors outweigh the Si 50.000 in incremental income
- B. select an approbate cost allocation method to allocate the $1 100 000 joint costs
- C. ignore the $200 000 sales revenue for the by-product because it Is irrelevant
- D. treat the $100,000 conversion cost as the marginal cost 1o produce the new product
Answer: D
NEW QUESTION # 94
if a company increases the price of its product from $3010 $35, demand would decrease from 30, 000 units to
20.000 units. What is the price elasticity of demand for the company using the midpoint formula?
- A. 2.7
- B. 0.5
- C. 0.4
- D. 2.0
Answer: A
NEW QUESTION # 95
Which one of the following statements regarding portfolio diversification is not correct?
- A. A well diversified portfolio can minimize unsystematic risk
- B. A well diversified portfolio should include individual stock investments having a balance of positive and negative betas.
- C. The standard deviation of a well diversified portfolio's percentage returns should be approximately equal to the standard deviation of the entire stock market's percentage returns.
- D. A well diversified portfolio can eliminate systematic risk.
Answer: D
NEW QUESTION # 96
Ryan Fitzgerald the vice president of finance for Southwest Development Company is evaluating a proposed expansion plan currently. Southwest Development has $660 million of total assets and the company's equity ratio Is 38% Southwest Development has never issued preferred shares. The company's earnings before interest and taxes (EBIT) are $83 6 million. The interest rate on their debt is 7 2% and the company's tax rate is 30%. The company is planning to expand by investing $110 million. In assets. As result both sales and EBIT will increase by 20%. The expansion will be financed with 40% debt and 60% common equity If Southwest Development proceeds with the expansion what will happen to the company's return on equally (ROE)?
- A. ROE decreases from 28.25% to 26.40%.
- B. ROE increases from 19.78% to 20.17%.
- C. ROE decreases from 19.78% to 18.48%.
- D. ROB increases from 14.07% to 14.12%.
Answer: C
NEW QUESTION # 97
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