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CIMA Exam CIMAPRA19-P03-1 Topic 3 Question 63 Discussion

Actual exam question for CIMA's CIMAPRA19-P03-1 exam

Question #: 63
Topic #: 3

[All CIMAPRA19-P03-1 Questions]

Division A of X plc produced the following results in the last financial year.

Net profit $200,000 Gross capital employed$1,000,000

For evaluation purposes all divisional assets are valued at original cost.

The division is considering a project that has a positive NPV, will increase annual net profit by $15,000, but will require average inventory levels to increase by $50,000 and non-current assets to increase by $50,000.

Xplc imposes a 16% capital charge on its divisions. Given these circumstances, will the evaluation criteria of return on investment (ROI) and residual income (RI) motivate divisionAmanagers to accept the project?

AROI Yes RI Yes

BROI Yes RI No

CROI No RI Yes

DROI No RI No

Show Suggested Answer

Suggested Answer: C, D, F

by Herminia at Jan 14, 2025, 02:36 AM

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Elliott

1 months ago

ROI and RI, the dynamic duo of corporate decision-making. Bet the exam writers had a field day coming up with this one.

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Gilma

2 months ago

Let's see, increased profits but also more capital employed. Better call in the management consultants to sort this out!

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Emmett

6 days ago

B) ROI Yes RI No

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Margot

9 days ago

I think the project should be accepted based on the ROI and RI criteria.

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Latrice

1 months ago

A) ROI Yes RI Yes

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Nikita

2 months ago

This is the kind of question that keeps accountants up at night. Time to break out the abacus and sharpen the pencils!

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Kerry

2 months ago

Ah, the age-old dilemma of corporate performance metrics. Sounds like a job for a spreadsheet ninja!

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Lyda

9 days ago

It seems like the project might be accepted based on RI only.

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Lavera

15 days ago

C) ROI No RI Yes

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Elliott

19 days ago

I'm not sure if the project will be accepted based on ROI alone.

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Melynda

30 days ago

B) ROI Yes RI No

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Whitney

1 months ago

B) ROI Yes RI No

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Mel

1 months ago

I think the project will be accepted based on both ROI and RI.

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Nicolette

1 months ago

A) ROI Yes RI Yes

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Whitney

1 months ago

A) ROI Yes RI Yes

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Ma

2 months ago

Hmm, this is a tricky one. Gotta weigh the impact on ROI and RI carefully. Wonder if there's a calculator app for this?

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Merilyn

2 months ago

But what about RI? Will that also motivate them?

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Melvin

3 months ago

I believe ROI will motivate them to accept the project, as it will increase annual net profit.

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Merilyn

3 months ago

Do you think the evaluation criteria of ROI and RI will motivate division A managers to accept the project?

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