Page 489 - Microsoft Word - 00 CIMA F1 Prelims STUDENT 2018.docx

Answers to supplementary objective test questions

2.4 8.83%

Interest cash flows for cost of debt are calculated post tax.

Interest = 8 × (1– 0.25) = 6

5% 10%
CF DF PV CF DF PV
t0 –93 1 –93 –93 1 –93
t1–3 6 2.723 16.34 6 2.487 14.92

t3 100 0.864 86.40 100 0.751 75.10
NPV 9.74 –2.98

IRR = 5 + (9.74/(9.74 + 2.98)) × (10-5)

k d = 8.83%

CHAPTER 3 – FINANCIAL INSTRUMENTS

3.1 B

As the financial asset is held for trading purposes, it must be classified as fair
value through profit or loss.

3.2 C

Derivative financial instruments will include terms that can be both favourable or
unfavourable (this will determine whether the derivative is a financial asset or
liability).

3.3 D

Forward contracts are an example of derivatives. Derivatives are classified as
FVPL as per IAS 39. The forward should be revalued to fair value as at the year
end and gains/losses will be taken to the statement of profit or loss.

As the forward was in a gain position of $1m, an asset will be recorded
(classified as FVPL) and the gain is taken to P/L.

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