CIMAPRA19-P03-1 Exam - Topic 2 Question 21 Discussion

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

Question #: 21
Topic #: 2

The board of OKN is considering an investment opportunity that will require the company to borrow a large amount in month 10 of the current financial year and to invest it immediately in property, plant and equipment. This investment has a positive net present value that justifies the risk, but the directors are reluctant to invest in the project.

Why might the directors be reluctant?

AThe return on capital employed for the year will be reduced if the investment is made.

BThe return on capital employed for the year will be increased if the investment is made.

CThe year's profit will be depressed by the amount of the investment.

DFuture profits will be depressed.

Show Suggested Answer

Suggested Answer: A, B, D

by Marguerita at Dec 28, 2022, 06:49 AM

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Jose

4 months ago

Future profits could be at risk, though.

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Lauran

4 months ago

Surprised they’d hesitate with a positive NPV!

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Mariko

4 months ago

But isn't the long-term gain worth it?

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Joesph

4 months ago

Totally agree, the investment could hurt this year's numbers.

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Ollie

4 months ago

They might be worried about short-term profits.

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Lawrence

5 months ago

I think option C makes sense because if they invest now, the profits for this year could take a hit, right?

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Aliza

5 months ago

I practiced a similar question where the focus was on immediate financial impacts versus long-term gains. It feels relevant here.

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Chun

5 months ago

I'm not entirely sure, but I think the directors might be worried about how the investment will affect this year's profits.

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Kimberely

5 months ago

I remember discussing how large investments can impact short-term financial metrics, like return on capital employed.

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Jillian

5 months ago

This is a tricky one. I'm not super familiar with the Avaya Aura products, so I'll have to rely on my general networking knowledge. I think C and D are the most likely answers, but I'm not 100% confident.

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Corrina

5 months ago

I'm a bit confused by the terminology used in this question. What exactly is a "marge code"? And how does that relate to passing data between different actions in an integration procedure? I'll need to do some additional research on integration procedures and the specific syntax used to reference data nodes before I can confidently answer this question.

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Dalene

5 months ago

This reminds me of a practice question I did about transaction verification, and I feel like it's more complicated than just 'true' or 'false.'

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Desire

9 months ago

Maybe they're just holding out for a better investment opportunity, like a used car dealership or a pet rock franchise. This property thing sounds way too risky.

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Cordelia

8 months ago

Maybe they're just holding out for a better investment opportunity, like a used car dealership or a pet rock franchise. This property thing sounds way too risky.

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Clarence

8 months ago

C) The year's profit will be depressed by the amount of the investment.

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Carlee

8 months ago

Maybe they're just holding out for a better investment opportunity, like a used car dealership or a pet rock franchise. This property thing sounds way too risky.

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Evan

8 months ago

C) The year's profit will be depressed by the amount of the investment.

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Kristal

8 months ago

A) The return on capital employed for the year will be reduced if the investment is made.

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Art

8 months ago

A) The return on capital employed for the year will be reduced if the investment is made.

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Lorenza

10 months ago

The directors are probably just worried they'll have to wear hard hats and safety vests on the construction site. Can't mess up those fancy suits, you know?

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Glory

10 months ago

The directors must have their heads in the sand if they're not jumping at this opportunity. Option B is clearly the correct answer - the return on capital employed will increase!

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Daren

9 months ago

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Elenor

9 months ago

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Denny

9 months ago

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Kris

10 months ago

Maybe they're just risk-averse and don't want to rock the boat, even if the long-term benefits look good. Option D could be the culprit here.

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Solange

9 months ago

Maybe they're worried about the short-term impact on profits.

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Yolando

9 months ago

C) The year's profit will be depressed by the amount of the investment.

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Ena

9 months ago

A) The return on capital employed for the year will be reduced if the investment is made.

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Lettie

10 months ago

I think they're concerned about the upfront cost and the potential hit to profits this year. Option C makes the most sense to me.

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Shawnta

8 months ago

D) Future profits will be depressed.

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Andra

8 months ago

A) But the long-term benefits of the investment could outweigh the short-term impact on profits.

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Rodolfo

8 months ago

C) The year's profit will be depressed by the amount of the investment.

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Mari

9 months ago

A) The return on capital employed for the year will be reduced if the investment is made.

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Kanisha

9 months ago

D) Future profits will be depressed.

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Desmond

9 months ago

I agree, the upfront cost and impact on profits this year are valid concerns.

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Alberto

9 months ago

C) The year's profit will be depressed by the amount of the investment.

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Chanel

10 months ago

A) The return on capital employed for the year will be reduced if the investment is made.

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Laticia

11 months ago

Hmm, the directors must be worried about the impact on the current year's financial performance. Option A seems like the most likely reason for their reluctance.

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