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CIMAPRO19-P02-1 Exam - Topic 3 Question 119 Discussion

Actual exam question for CIMA's CIMAPRO19-P02-1 exam
Question #: 119
Topic #: 3
[All CIMAPRO19-P02-1 Questions]

Which of the following would change if the cost of capital of a proposed project was increased?

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Suggested Answer: D

by Jeff at Nov 23, 2025, 09:43 PM

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Kristofer
2 months ago
True, but C) Accounting rate of return might also be stable. It’s based on profits, not costs.
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Katina
2 months ago
I feel B) Payback period stays the same. It’s time-based, not cost-based.
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Adell
2 months ago
Not directly, but it can impact decision-making.
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Winfred
2 months ago
But what about A) Internal rate of return? Does it not get affected too?
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Merilyn
2 months ago
Agreed! NPV is sensitive to cost changes.
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Julieta
3 months ago
I’m not convinced about the IRR part, seems off to me.
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Gerald
3 months ago
Wait, are you sure IRR is affected too?
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Sylvie
3 months ago
I think the payback period stays the same, right?
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Edelmira
4 months ago
D) Net present value, obviously. Increasing the cost of capital is like asking for a bigger slice of the pie - it's gonna make the whole project look less appetizing.
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Elza
4 months ago
D) Net present value, because that's the only one that directly depends on the cost of capital. The others might be affected, but not as directly.
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Jolene
4 months ago
I'm going with D. Increasing the cost of capital is like asking for a higher interest rate on a loan - it's gonna hurt that net present value.
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Denny
4 months ago
Definitely D. Increasing the cost of capital would make the project less attractive, reducing the net present value.
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Annmarie
4 months ago
D) Net present value would change if the cost of capital of a proposed project was increased.
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Werner
4 months ago
I feel like the accounting rate of return is also pretty stable, but I could be mixing it up with something else we studied.
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Lindy
5 months ago
The payback period seems like it wouldn't be affected since it's more about cash flow timing, right? But I'm not completely confident.
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Roy
5 months ago
I remember practicing a question like this, and I think the internal rate of return might not change directly, but it could affect the decision-making process.
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Harley
5 months ago
I think the net present value would definitely change if the cost of capital increases, but I'm not sure about the others.
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Sherita
5 months ago
Okay, I think I've got this. Higher cost of capital means future cash flows are worth less in today's dollars. So that's going to decrease NPV and IRR, since those measures are sensitive to the discount rate. The payback and accounting rate are more focused on the timing and magnitude of the cash flows, so those would likely change as well, but in less predictable ways.
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Novella
5 months ago
I remember learning that higher cost of capital means future cash flows are discounted more heavily. So that would impact NPV for sure, and probably the IRR too. Payback and accounting rate might change as well, but I'm less confident on those.
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Shoshana
5 months ago
I think D) Net present value would change. Higher cost of capital reduces NPV.
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Alona
6 months ago
Definitely NPV would change with a higher cost of capital.
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Lillian
6 months ago
I'm a bit confused on this one. The cost of capital is all about the required rate of return, right? But how exactly does that affect things like payback period and accounting rate of return? I'll need to review my notes.
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Luisa
6 months ago
Totally agree, NPV is the main one that shifts!
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Annabelle
6 months ago
Okay, I know the cost of capital is a key input for calculating NPV. So if that goes up, the NPV should go down. But I'm not as sure about the other measures.
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Aleta
6 months ago
Hmm, this seems like a tricky one. I'll need to think through the relationships between cost of capital and those project evaluation metrics.
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Starr
25 days ago
Right! It's all about the relationship between them.
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Rima
30 days ago
Not directly, but it affects the comparison with cost of capital.
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Clare
1 month ago
What about A) Internal rate of return? Does that change too?
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Starr
1 month ago
Agreed! Higher cost of capital impacts NPV directly.
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Rima
2 months ago
I think D) Net present value would definitely change.
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