IMANET Exam CMA Topic 1 Question 103 Discussion

Actual exam question for IMANET's CMA exam

Question #: 103
Topic #: 1

[All CMA Questions]

Barker, Inc. has no capital rationing constraint and is analyzing many independent investment alternatives. Barker should accept all investment proposals

AIf debt financing is available for them.

BThat have positive cash flows.

CThat provide returns greater than the before-tax cost of debt.

DThat have a positive net present value.

Show Suggested Answer

Suggested Answer: D

Initially, the company must invest $105,000 in the machine. Consisting of the invoice price of $90 00. the delivery costs of $6,000, and the installation costs of $9,000.

by Marge at Nov 16, 2024, 12:07 AM

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Jesse

2 months ago

Wait, Barker has no capital rationing constraint? Lucky them! I wish my company had that luxury. Option D all the way!

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Staci

10 days ago

Yes, Barker is in a good position without capital rationing. Option D makes sense.

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Huey

2 months ago

Hmm, I'm not sure. I think option A makes the most sense. Barker should accept all investment proposals if they have access to debt financing, right?

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Katlyn

3 days ago

User 3: Yes, that way Barker can maximize their potential returns on investments.

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Alana

4 days ago

User 2: I agree. It would make sense to take advantage of debt financing for investment opportunities.

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Angella

5 days ago

User 1: I think option A is a good choice. If debt financing is available, Barker should accept all investment proposals.

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Leonor

2 months ago

Haha, who needs a cost of debt when you can just borrow money from your rich uncle at 0% interest? Option C is clearly the way to go!

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Dana

1 days ago

User 4: As long as the investment has a positive net present value, it's a good choice for Barker.

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Rickie

5 days ago

User 3: Option C all the way, positive cash flows are key for Barker, Inc.

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Alberto

12 days ago

User 2: Definitely, as long as the investment provides returns greater than the cost of debt.

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Tamra

14 days ago

User 1: I agree, borrowing money at 0% interest is the best option.

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Jina

2 months ago

I disagree. I believe option B is the way to go. Barker should accept all investment proposals that have positive cash flows, regardless of their net present value.

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Wilburn

2 months ago

But what about the ones that provide returns greater than the before-tax cost of debt?

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Shaquana

2 months ago

I think option D is the correct answer. Barker should accept all investment proposals that have a positive net present value, as this will maximize the company's value.

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