CIMA Exam CIMAPRA19-P03-1 Topic 4 Question 65 Discussion

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

Question #: 65
Topic #: 4

Having carried out a full capital appraisal for a construction project, HCompanyhasapproved the project with initial outflows of $6,000,000 anda net present value of $1,200,000.

The implementation phase has been commenced with 25% of the costs already committed.However whenthe ground was opened, an underground waterway was revealedwhich will need to be diverted if the project is to proceed. Work to carry out this diversion has been estimated at $1,300,000.

Which of the following factors will define whether the project should go ahead or not?

AThe project actually has a higher NPV than before.

BThe project now has a negative NPV.

CAbandoning the project will have an adverse effect on shareholder confidence.

DThere will be abandonment costs to restore the site.

EThere may be other unexpected costs to be met if the project continues.

Show Suggested Answer

Suggested Answer: A, B, C

by Edison at Feb 06, 2025, 08:21 AM

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Alaine

2 months ago

Ha! Unexpected costs? That's the story of every construction project, isn't it? The project managers must be pulling their hair out right now.

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Dean

18 days ago

Julieta: I wonder how they will decide whether to proceed or not with this new cost.

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Julieta

19 days ago

User 2: Definitely, it's a common challenge project managers face.

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Shizue

26 days ago

User 1: Yeah, unexpected costs always seem to pop up in construction projects.

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Nan

2 months ago

The question is asking about the factors that will define whether the project should go ahead or not. I think option B is the correct answer - the negative NPV is the key factor here.

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Elena

10 days ago

So we need to consider both the negative NPV and the impact on shareholder confidence before making a decision.

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Alecia

14 days ago

That's a good point. Option C mentions that abandoning the project will have an adverse effect on shareholder confidence.

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Gianna

1 months ago

But what about the impact on shareholder confidence if we abandon the project?

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Sheridan

1 months ago

I think option B is the correct answer - the negative NPV is the key factor here.

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Ezekiel

2 months ago

This is a tricky one. The project was initially approved, but now there's a major unexpected cost. Shareholder confidence is definitely a factor to consider.

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Carline

26 days ago

C) Abandoning the project will have an adverse effect on shareholder confidence.

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Kristin

1 months ago

B) The project now has a negative NPV.

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Nada

1 months ago

A) The project actually has a higher NPV than before.

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Delmy

1 months ago

C) Abandoning the project will have an adverse effect on shareholder confidence.

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Aja

1 months ago

E) There may be other unexpected costs to be met if the project continues.

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Glory

2 months ago

A) The project actually has a higher NPV than before.

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Shenika

2 months ago

Hmm, the project has already incurred significant costs, but the NPV is now negative. I wonder if the additional cost of diverting the waterway will outweigh the expected benefits.

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