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CIMAPRA19-P03-1 Exam - Topic 4 Question 86 Discussion

P Ltd, a manufacturing company, is considering a new capital investment project to set up a new production line. The initial appraisal shows a healthy net present value of $6,465 millionat a discount rate of 10% as shown in the table below:However, management is unsure about the demand for theproduct which will be produced and has insisted that the future revenues should be reduced to certainity equivalents by taking 70%, 65% and 60% of the years 1,2, and 3 cash inflows respectively.What should P do?
D) Re-appraise the project using other capital appraisal techniques to get a more balanced view.
A) Proceed with the project, it has a healthy net present value.
B) Stop the project, it has considerable risk.
C) Put pressure on sales and marketing to re-verify their forecasts.

CIMAPRA19-P03-1 Exam - Topic 4 Question 86 Discussion

Actual exam question for CIMA's CIMAPRA19-P03-1 exam
Question #: 86
Topic #: 4
[All CIMAPRA19-P03-1 Questions]

P Ltd, a manufacturing company, is considering a new capital investment project to set up a new production line. The initial appraisal shows a healthy net present value of $6,465 millionat a discount rate of 10% as shown in the table below:

However, management is unsure about the demand for theproduct which will be produced and has insisted that the future revenues should be reduced to certainity equivalents by taking 70%, 65% and 60% of the years 1,2, and 3 cash inflows respectively.

What should P do?

Show Suggested Answer Hide Answer
Suggested Answer: D

by Leslie at Jun 17, 2026, 07:18 AM

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Shayne
10 hours ago
Yes, pressure on sales might help.
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Gerald
6 days ago
Re-appraising could give a clearer picture.
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Elena
11 days ago
True, but the numbers look good overall.
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Shayne
16 days ago
We need to verify forecasts first. Sales are key.
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Gerald
21 days ago
But the demand is uncertain. Risky move.
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Elena
26 days ago
I think they should proceed. NPV is strong.
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Marica
1 month ago
Better to re-appraise and get a clearer picture before proceeding.
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Ivette
1 month ago
Wait, reducing cash inflows by 30%? That seems extreme!
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Buffy
1 month ago
I think they should definitely re-verify those forecasts.
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Willard
2 months ago
But demand uncertainty is a big red flag.
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Roxane
2 months ago
NPV looks solid at $6.4 billion!
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Ernie
2 months ago
I feel like putting pressure on sales might not be the best approach. They might not have the right data to back up their forecasts anyway.
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Burma
2 months ago
I'm not sure if just relying on the NPV is enough. The management's concerns about demand could mean we should be cautious.
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Leota
2 months ago
I think we had a similar question where we had to consider risk factors. Maybe option D makes sense to get a clearer picture?
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Rose
2 months ago
I remember we discussed how a high NPV is a good sign, but the uncertainty in demand really complicates things.
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