CIMA CIMA Certifications CIMAPRO19-P02-1 Questions & Answers

• Question 141:

  The following data are available for an investment centre for the latest period. Where appropriate the data have been adjusted to reflect economic values. What cost of capital has been used to calculate the EVA?

  

  Give your answer to the nearest percentage.

  A. 9 %

  Correct Answer: A

• Question 142:

  A not-for-profit organization measures performance using the three Es. If the organization has been acquiring the resources it needs as cheaply as possible it should be described as having been:

  A. Efficient

  B. Effective

  C. Economic

  D. Enterprising

  Correct Answer: C

• Question 143:

  A not-for-profit organization measures performance using the three Es. If the organization has made optimum utilization of available resources then it should be described as:

  A. Efficient

  B. Effective

  C. Economic

  D. Enterprising

  Correct Answer: A

• Question 144:

  An organization has carried out a risk assessment for a project. Which of the following possible outcomes are examples of upside risk? Select ALL that apply.

  A. The project might be developed more quickly than expected.

  B. The project's costs might be higher than expected.

  C. The project's Economic Value Added might be higher than expected.

  D. The project's environmental damage might be less than expected.

  E. The project's payback period might be greater than expected.

  Correct Answer: ACD

• Question 145:

  The following forecast data relate to the first three years of a five year project. The project will require an initial investment of $30,000 in non-current assets. All revenue will be received in the year it is earned and all operating costs will be paid

  in the year they are incurred. Tax will be paid in the following year. Tax depreciation will be 25% per annum of the reducing balance.

  The taxation rate will be 30% of taxable profits.

  

  What is the forecast after tax cash flow for year 3 (to the nearest $10)?

  A. $45,890

  B. $39,750

  C. $46,000

  D. $38,500

  Correct Answer: A

• Question 146:

  Which TWO of the following conditions are necessary for a learning curve to apply?

  A. The process must be simple.

  B. The process must be complex.

  C. There must be regular breaks in production.

  D. Production must be machine intensive.

  E. Production must be labor intensive.

  Correct Answer: BE

• Question 147:

  A project has a positive net present value (NPV) when discounted at a company's weighted average cost of capital (WACC). The project has also been evaluated using a range of other investment appraisal techniques.

  It has now been recognized that the project is of much higher risk than the average risk of the company's existing portfolio of projects. It has therefore been decided that the discount rate to be used when evaluating this project should be the

  WACC adjusted for risk. As the result of changing the discount rate as described, which of following statements are correct? Select ALL that apply.

  A. The net present value would decrease.

  B. The internal rate of return would decrease.

  C. The accounting rate of return would decrease.

  D. The internal rate of return would remain unchanged.

  E. The profitability index would remain unchanged.

  F. The net present value would increase.

  Correct Answer: AD

• Question 148:

  A division of company XYZ has reported an operating profit of $350,000 and its residual income (RI) has been calculated as $60,000. The company's cost of capital is 12%. The division's return on investment (ROI) is:

  A. 14.5%

  B. 17.0%

  C. 12.0%

  D. 2.5%

  Correct Answer: A

• Question 149:

  A company wishes to appraise a potential project. One of the project's relevant cash flows is the receipt, expressed in money terms, of $20,000 per year for the first 5 years. The company's real cost of capital is 5% per year and the expected rate of inflation is 3% per year. What is the real value of the expected receipt in year 2? Give your answer to the nearest $10.

  A. $18850

  Correct Answer: A

• Question 150:

  Performance measures that monitor the extent to which a not-for-profit organization's objectives have been achieved are measures of:

  A. economy

  B. efficiency

  C. effectiveness

  D. enterprise

  Correct Answer: C