CIMA Exam CIMAPRO19-P02-1 Topic 1 Question 72 Discussion

Actual exam question for CIMA's CIMAPRO19-P02-1 exam

Question #: 72
Topic #: 1

[All CIMAPRO19-P02-1 Questions]

An investment centre is appraising a potential project that is expected to yield a Return on Investment (ROI) of 12%.

Without the project the investment centre expects to earn an ROI of 14%. The cost of capital is 10%.

What would be the impact on the investment centre's performance measures if the project is accepted?

AResidual Income would decrease and ROI would increase.

BResidual Income would decrease and ROI would decrease.

CResidual Income would increase and ROI would increase.

DResidual Income would increase and ROI would decrease.

Show Suggested Answer

Suggested Answer: D

by Eden at Jul 31, 2023, 01:32 AM

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Twana

1 days ago

I'm going to go with D. If the project's ROI is lower, that means Residual Income will increase, but ROI will decrease. It's like getting a participation trophy, but with less actual performance.

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Merilyn

4 days ago

Hmm, I think the answer is B. The project's ROI is lower than the current ROI, so that should decrease both Residual Income and ROI.

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Avery

7 days ago

This is a tricky one! The key is to understand how ROI and Residual Income are affected when the project's ROI is lower than the existing ROI.

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Margarita

8 days ago

Yes, you're right. So the answer would be A) Residual Income would decrease and ROI would increase.

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Von

13 days ago

But wouldn't the ROI increase in that case?

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Margarita

16 days ago

I think if the project is accepted, the Residual Income would decrease.

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