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ICAN Strategic Financial Management 2022 past questions and answers

This 2022 ICAN Strategic Financial Management set has 19 practice questions. Try these 5 free sample questions, tap a question to reveal the answer and explanation. Then practise the whole 2022 set with instant marking.

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Sample ICAN Strategic Financial Management 2022 questions

1. Kora Ltd is considering a machine costing ₦100 million now. It will generate after-tax net cash inflows of ₦45 million at each year-end for three years, with no residual value. At a 12% required return, using discount factors 0.893, 0.797 and 0.712 for years 1–3, what is the NPV to the nearest ₦0.1 million?
  1. ₦6.5 million
  2. ₦8.1 million
  3. ₦12.5 million
  4. Negative ₦8.1 million

Answer: B. ₦8.1 million

PV of inflows = ₦45m × (0.893 + 0.797 + 0.712) = ₦108.09m, so NPV = ₦8.09m, or ₦8.1m. Option D reverses the sign; the project creates value at the stated required return.

2. A company is financed by market-value equity of ₦60 million and debt of ₦40 million. Its cost of equity is 15%, pre-tax cost of debt is 10%, and corporation tax is 30%; assume full interest tax relief. What is its WACC?
  1. 12.4%
  2. 10.0%
  3. 13.0%
  4. 11.8%

Answer: D. 11.8%

WACC = 0.60(15%) + 0.40(10%)(1 − 0.30) = 9.0% + 2.8% = 11.8%. Option C omits the debt tax adjustment or misweights the financing components.

3. An analyst estimates an equity beta of 1.3 for Doro Ltd. The risk-free rate is 5% and the market risk premium is 6%. Using CAPM, what cost of equity should be used?
  1. 12.8%
  2. 11.3%
  3. 13.0%
  4. 10.8%

Answer: A. 12.8%

CAPM gives 5% + 1.3 × 6% = 12.8%. Option B uses the beta as an additive percentage rather than multiplying the market risk premium.

4. A private company has maintainable annual post-tax earnings of ₦36 million attributable to equity holders. A suitable equity capitalization rate is 12%; there is no surplus cash or other adjustment. Using earnings divided by the capitalization rate, what is the estimated equity value?
  1. ₦216 million
  2. ₦250 million
  3. ₦300 million
  4. ₦432 million

Answer: C. ₦300 million

Equity value = ₦36m ÷ 0.12 = ₦300m. Multiplying earnings by 12% (option A’s underlying error) reverses the capitalization calculation.

5. Aro Ltd is valued independently at ₦300 million and Bisi Ltd at ₦180 million. The combined business is expected to be worth ₦520 million after acquisition. Aro will pay Bisi’s shareholders ₦210 million in cash. Ignoring transaction costs, what is the value gain to Aro’s shareholders?
  1. ₦10 million
  2. ₦30 million
  3. ₦40 million
  4. Negative ₦10 million

Answer: A. ₦10 million

The synergy is ₦520m − ₦300m − ₦180m = ₦40m; after paying a ₦30m premium over Bisi’s standalone value, Aro’s shareholders gain ₦10m. Option C is the total synergy before deducting the premium.

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