CIMAPRA19-P03-1 Exam - Topic 4 Question 65 Discussion

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

Question #: 65
Topic #: 4

Having carried out a full capital appraisal for a construction project, HCompanyhasapproved the project with initial outflows of $6,000,000 anda net present value of $1,200,000.

The implementation phase has been commenced with 25% of the costs already committed.However whenthe ground was opened, an underground waterway was revealedwhich will need to be diverted if the project is to proceed. Work to carry out this diversion has been estimated at $1,300,000.

Which of the following factors will define whether the project should go ahead or not?

AThe project actually has a higher NPV than before.

BThe project now has a negative NPV.

CAbandoning the project will have an adverse effect on shareholder confidence.

DThere will be abandonment costs to restore the site.

EThere may be other unexpected costs to be met if the project continues.

Show Suggested Answer

Suggested Answer: A, B, C

by Edison at Feb 06, 2025, 08:21 AM

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Kyoko

3 months ago

Unexpected costs could really derail this project.

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Margot

3 months ago

Totally agree, shareholder confidence matters!

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Carman

3 months ago

Wait, how can they not see this coming?

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Marylin

4 months ago

If it goes negative, that's a big red flag!

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Lang

4 months ago

The initial NPV was $1,200,000.

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Bernardine

4 months ago

I feel like the abandonment costs mentioned in option D could be significant if they need to restore the site, but I’m not completely confident about how to quantify that.

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Chan

4 months ago

I practiced a similar question where we had to weigh the impact on shareholder confidence, so I think option C could also be a factor to consider.

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Dusti

4 months ago

I’m not entirely sure, but I think if the NPV turns negative, that could be a strong reason to reconsider the project, which makes option B important.

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Anisha

5 months ago

I remember discussing how unexpected costs can really impact the overall NPV, so option E seems relevant.

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Lina

5 months ago

This is a tough one. I'll need to carefully evaluate the revised NPV, but also consider the broader implications for the company and its stakeholders. Lots to think about here.

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Carma

5 months ago

Abandoning the project could hurt shareholder confidence, so that's definitely a factor to weigh. And there may be other hidden costs if we continue, so I'll need to think through all the potential implications.

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Queen

5 months ago

I think the key here is to consider the factors that will determine whether the project should go ahead or not. The revised NPV is important, but there may be other strategic considerations as well.

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Mable

5 months ago

Okay, so the initial NPV was positive, but now we have this unexpected cost. I'm not sure if that will push the NPV into negative territory or not. I'll need to crunch the numbers to be sure.

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Alpha

5 months ago

Hmm, this seems like a tricky one. I'll need to carefully calculate the revised NPV after factoring in the additional $1.3 million cost to divert the waterway.

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Alaine

10 months ago

Ha! Unexpected costs? That's the story of every construction project, isn't it? The project managers must be pulling their hair out right now.

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Dean

9 months ago

Julieta: I wonder how they will decide whether to proceed or not with this new cost.

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Julieta

9 months ago

User 2: Definitely, it's a common challenge project managers face.

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Shizue

9 months ago

User 1: Yeah, unexpected costs always seem to pop up in construction projects.

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Nan

10 months ago

The question is asking about the factors that will define whether the project should go ahead or not. I think option B is the correct answer - the negative NPV is the key factor here.

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Elena

9 months ago

So we need to consider both the negative NPV and the impact on shareholder confidence before making a decision.

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Alecia

9 months ago

That's a good point. Option C mentions that abandoning the project will have an adverse effect on shareholder confidence.

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Gianna

10 months ago

But what about the impact on shareholder confidence if we abandon the project?

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Sheridan

10 months ago

I think option B is the correct answer - the negative NPV is the key factor here.

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Ezekiel

11 months ago

This is a tricky one. The project was initially approved, but now there's a major unexpected cost. Shareholder confidence is definitely a factor to consider.

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Carline

9 months ago

C) Abandoning the project will have an adverse effect on shareholder confidence.

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Kristin

9 months ago

B) The project now has a negative NPV.

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Nada

9 months ago

A) The project actually has a higher NPV than before.

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Delmy

10 months ago

C) Abandoning the project will have an adverse effect on shareholder confidence.

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Aja

10 months ago

E) There may be other unexpected costs to be met if the project continues.

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Glory

10 months ago

A) The project actually has a higher NPV than before.

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Shenika

11 months ago

Hmm, the project has already incurred significant costs, but the NPV is now negative. I wonder if the additional cost of diverting the waterway will outweigh the expected benefits.

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