F3 Exam Dumps | A company's gearing is well below its optimal level and therefore it is considering implementing a share

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CIMA.F3.v2022-04-02.q101
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Question 94/101

A company's gearing is 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 a planned new long-term bond issue.
Its financial projections show no change to next year's expected earnings.
As a result, the company plans to pay the same total dividend in future years.
If the share re-purchase is implemented, which THREE of the following measures are most likely to decrease?

A. The Weighted Average Cost of Capital

B. The cost of equity

C. The number of shares in issue

D. Next year's dividend per share

E. The interest cover

F. The gearing, based on book value (debt ÷ (debt + equity))

Correct Answer: A,C,E

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