CIMA Exam CIMAPRO19-P01-1 Topic 4 Question 76 Discussion

Actual exam question for CIMA's CIMAPRO19-P01-1 exam

Question #: 76
Topic #: 4

JDM is considering whether to go ahead with the launch of a new product. Profit from the new product is dependent on the level of demand.

The following table shows the estimated profits and their respective probabilities at different levels of demand.

The company could still cancel the launch of the product but would incur a cost of $7,000.

What is the maximum amount that the company should pay for perfect information about demand for the product?

A$13,350

B$41,000

C$16,500

D$37,850

Show Suggested Answer

Suggested Answer: A, D, E

References:

by Wynell at Oct 22, 2023, 12:04 PM

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Dominic

5 days ago

I think the correct answer is C) $16,500. The maximum amount the company should pay for perfect information is the expected value of the information, which is the difference between the expected profit with perfect information and the expected profit without it.

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