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CIMAPRO19-P02-1 Exam - Topic 2 Question 116 Discussion

There is a 60% probability of a project yielding a positive net present value (NPV) of $280,000 and a 30% probability of it yielding a positive NPV of $140,000.The only other possible outcome is that the project will yield a negative NPV of $160,000.What is the expected value of the project's NPV?
A) $194,000
B) $210,000
C) $280,000
D) $260,000

CIMAPRO19-P02-1 Exam - Topic 2 Question 116 Discussion

Actual exam question for CIMA's CIMAPRO19-P02-1 exam
Question #: 116
Topic #: 2
[All CIMAPRO19-P02-1 Questions]

There is a 60% probability of a project yielding a positive net present value (NPV) of $280,000 and a 30% probability of it yielding a positive NPV of $140,000.

The only other possible outcome is that the project will yield a negative NPV of $160,000.

What is the expected value of the project's NPV?

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Suggested Answer: A

by Justine at Aug 12, 2025, 04:36 PM

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Haley
9 months ago
Wait, how do we know the probabilities are accurate?
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Lashawn
9 months ago
I think it's around $194,000, seems right!
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Marcelle
9 months ago
I calculated it too, and I got $210,000. What gives?
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Elvis
9 months ago
Definitely not $280,000, that's way too high!
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Andra
10 months ago
The expected value is calculated using probabilities and outcomes.
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Kizzy
10 months ago
I feel like the answer might be around $210,000, but I’m not completely confident in my calculations.
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Whitney
10 months ago
I think the expected value should be a weighted average, but I can't recall how to handle the negative NPV in this case.
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Aleta
10 months ago
This question feels similar to one we did in class about project evaluations. I think I need to multiply the NPVs by their probabilities first.
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Margarita
10 months ago
I remember we practiced calculating expected values, but I'm not sure if I got the probabilities right for each outcome.
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France
11 months ago
No problem, I've got this. I'll multiply each outcome by its probability, then add them all together. The expected value should be the answer.
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Luke
11 months ago
Wait, I'm a little confused. How do I know which outcome to use for the expected value calculation? Do I just add up all the possible outcomes?
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Cherrie
11 months ago
Hmm, this seems straightforward enough. I just need to remember the formula for expected value and plug in the numbers. I think I can handle this.
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Lonny
11 months ago
Okay, let's think this through step-by-step. We have three possible outcomes with their respective probabilities. To find the expected value, we need to multiply each outcome by its probability and then add them up.
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