How do we pay for it? Alex weighs the pros and cons of issuing new shares ( ) versus taking out a bank loan ( ). He’s mindful of the WACC (Weighted Average Cost of Capital)
"The CFO of a mid-cap UK exporter has a gearing ratio of 65% (target 40%). They expect the Bank of England to raise rates by 0.5% in 6 months. They also have a large USD receivable in 6 months." Cima F3 Notes Financial Strategy Chapters 1 And 2
Spot = 1.2500, Futures (3 months) = 1.2600. Basis = 1.2600 – 1.2500 = 0.0100. If 1 month passes, the basis should decay to roughly 0.0033 (2/3 of 0.01 remaining). You need this for mark-to-market calculations. How do we pay for it
Exam Tip: In F3, you may be asked to identify conflicting objectives between stakeholders (e.g., employees wanting higher wages vs. shareholders wanting higher dividends) and suggest how a CFO should manage this conflict. They expect the Bank of England to raise rates by 0