CIMA Exam CIMAPRO19-P03-1 Topic 5 Question 48 Discussion

Actual exam question for CIMA's CIMAPRO19-P03-1 exam

Question #: 48
Topic #: 5

YHJ is considering an investment in a project that will cost $20 million. Annual fixed costs will be $12 million per year, excluding depreciation. Annual sales are forecast at 5 million units, with a contribution per unit of $8. After five years the equipment will be worn out and YHJ will have to spend $50 million on disposal costs. The discount rate is 10%.

Calculate the sensitivity of the net present value of this project to a 20% increase in the disposal costs.

A11%

B13%

C31%

D20%

Show Suggested Answer

Suggested Answer: A, B, D

by Virgie at Apr 03, 2023, 08:47 AM

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Edna

1 months ago

I'm just hoping I don't have to do any origami with the financial statements to solve this one.

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Val

6 days ago

C) 31%

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Elvera

8 days ago

B) 13%

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Shawana

17 days ago

A) 11%

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Loreen

1 months ago

Wait, did they say the equipment will be worn out after five years? That's rough, I wonder if there's a way to extend the project's lifespan.

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Celestine

2 months ago

This question is making my head spin. I wish they had given us a calculator or something to make the math a little easier.

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Alyce

7 days ago

The sensitivity of the net present value to a 20% increase in disposal costs is 31%, so option C.

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Catalina

7 days ago

I agree, let's try to work through it step by step.

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Derick

10 days ago

That would be great, thank you!

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Pilar

12 days ago

I think the answer might be C) 31%.

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Victor

16 days ago

I know, this question is really challenging without a calculator.

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Dean

1 months ago

Don't worry, I can help you with the calculations.

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Lai

2 months ago

I bet the correct answer is C) 31%. That seems like the most significant sensitivity to the disposal costs.

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Raul

2 months ago

Alright, let's break this down step-by-step. The disposal costs are a significant factor, so a 20% increase could really impact the project's viability.

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