CIMA Exam CIMAPRO19-P02-1 Topic 1 Question 72 Discussion

Actual exam question for CIMA's CIMAPRO19-P02-1 exam

Question #: 72
Topic #: 1

[All CIMAPRO19-P02-1 Questions]

An investment centre is appraising a potential project that is expected to yield a Return on Investment (ROI) of 12%.

Without the project the investment centre expects to earn an ROI of 14%. The cost of capital is 10%.

What would be the impact on the investment centre's performance measures if the project is accepted?

AResidual Income would decrease and ROI would increase.

BResidual Income would decrease and ROI would decrease.

CResidual Income would increase and ROI would increase.

DResidual Income would increase and ROI would decrease.

Show Suggested Answer

Suggested Answer: D

by Eden at Jul 31, 2023, 01:32 AM

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Lindsey

6 days ago

Oooh, this one's a brain-teaser! I'm leaning towards B, but I'm also wondering if the investment center has a secret stash of magic beans that could make the numbers work out differently.

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Rebecka

8 days ago

This is a classic case of 'the numbers don't lie, but the accountants do.' I'm betting on B. Residual Income and ROI both go down. Unless, of course, the investment center is run by magicians.

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Twana

10 days ago

I'm going to go with D. If the project's ROI is lower, that means Residual Income will increase, but ROI will decrease. It's like getting a participation trophy, but with less actual performance.

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