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CIMA Exam CIMAPRA19-P03-1 Topic 3 Question 63 Discussion

Actual exam question for CIMA's CIMAPRA19-P03-1 exam
Question #: 63
Topic #: 3
[All CIMAPRA19-P03-1 Questions]

Division A of X plc produced the following results in the last financial year.

Net profit $200,000 Gross capital employed$1,000,000

For evaluation purposes all divisional assets are valued at original cost.

The division is considering a project that has a positive NPV, will increase annual net profit by $15,000, but will require average inventory levels to increase by $50,000 and non-current assets to increase by $50,000.

Xplc imposes a 16% capital charge on its divisions. Given these circumstances, will the evaluation criteria of return on investment (ROI) and residual income (RI) motivate divisionAmanagers to accept the project?

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Suggested Answer: C, D, F

by Herminia at Jan 14, 2025, 02:36 AM

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Elliott
1 months ago
ROI and RI, the dynamic duo of corporate decision-making. Bet the exam writers had a field day coming up with this one.
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Gilma
2 months ago
Let's see, increased profits but also more capital employed. Better call in the management consultants to sort this out!
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Emmett
5 days ago
B) ROI Yes RI No
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Margot
8 days ago
I think the project should be accepted based on the ROI and RI criteria.
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Latrice
1 months ago
A) ROI Yes RI Yes
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Nikita
2 months ago
This is the kind of question that keeps accountants up at night. Time to break out the abacus and sharpen the pencils!
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Kerry
2 months ago
Ah, the age-old dilemma of corporate performance metrics. Sounds like a job for a spreadsheet ninja!
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Lyda
8 days ago
It seems like the project might be accepted based on RI only.
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Lavera
14 days ago
C) ROI No RI Yes
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Elliott
18 days ago
I'm not sure if the project will be accepted based on ROI alone.
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Melynda
29 days ago
B) ROI Yes RI No
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Whitney
29 days ago
B) ROI Yes RI No
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Mel
1 months ago
I think the project will be accepted based on both ROI and RI.
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Nicolette
1 months ago
A) ROI Yes RI Yes
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Whitney
1 months ago
A) ROI Yes RI Yes
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Ma
2 months ago
Hmm, this is a tricky one. Gotta weigh the impact on ROI and RI carefully. Wonder if there's a calculator app for this?
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Merilyn
2 months ago
But what about RI? Will that also motivate them?
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Melvin
3 months ago
I believe ROI will motivate them to accept the project, as it will increase annual net profit.
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Merilyn
3 months ago
Do you think the evaluation criteria of ROI and RI will motivate division A managers to accept the project?
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