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CIMAPRO19-P02-1 Exam - Topic 8 Question 91 Discussion

Actual exam question for CIMA's CIMAPRO19-P02-1 exam
Question #: 91
Topic #: 8
[All CIMAPRO19-P02-1 Questions]

A company is investing $200,000 in a project which will generate a cash flow of $60,000 each year for five years starting immediately. The company's cost of capital is 7%.

The net present value of the investment to the nearest $100 is $

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Suggested Answer: A, C, D

by Leatha at Jun 29, 2024, 07:19 AM

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Moon
3 months ago
$63,200 seems high, double-check those numbers!
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Julianna
3 months ago
Totally agree, looks like a good investment!
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Phyliss
3 months ago
Wait, are we sure about that 7% cost of capital?
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Leonor
4 months ago
That's a solid cash flow for 5 years!
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Jeanice
4 months ago
NPV calculation is key here!
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Erick
4 months ago
I think the cash flows start immediately, which might mean we treat the first cash flow differently. I hope I remember the formulas correctly!
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Jerry
4 months ago
I feel like I might be mixing up the cost of capital with the discount rate. Is it the same thing in this case?
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Helga
4 months ago
I remember doing a similar question where we had to find the NPV, but I’m not sure if I should use the cash flow formula directly or discount each cash flow separately.
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Gaynell
5 months ago
I think we need to calculate the present value of those cash flows and then subtract the initial investment.
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Tu
5 months ago
This seems pretty straightforward. I'll just plug the numbers into the present value formula and do the calculation. As long as I don't make any silly mistakes, I should be able to get the right answer.
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Andrew
5 months ago
Hmm, I'm a bit unsure about how to approach this. I know it involves present value calculations, but I'm not sure if I should be using the formula or a financial calculator. I'll have to review my notes on this topic.
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Ceola
5 months ago
This looks like a straightforward time value of money problem. I'll start by calculating the present value of the annual cash flows using the given discount rate of 7%.
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Lillian
5 months ago
Okay, I think I've got this. I'll need to find the present value of the $60,000 annual cash flows over the 5-year period, and then subtract the initial investment of $200,000 to get the net present value. Shouldn't be too difficult.
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Benton
5 months ago
I remember learning about Lewin's model, but I'm drawing a blank on the specifics of the move stage. I'll have to think this through carefully.
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Rolland
5 months ago
Okay, let's see. The key information I need to determine is the cost basis of the 2,000 shares surrendered. Once I have that, I can calculate the gain or loss and select the correct answer.
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Dana
5 months ago
I think we need the server address, but I'm not sure if it's an APOP3 address or something else.
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Anika
9 months ago
I wonder if the company is investing in a time machine to get those cash flows. That would be a real money-maker!
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Shenika
8 months ago
Definitely, with a net present value like that, it seems like a smart investment.
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Winifred
8 months ago
I agree, $63,200 sounds about right. The company should definitely go for it!
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Clare
8 months ago
I think the net present value would be $63,200. What about you?
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Chanel
9 months ago
That would be amazing if they had a time machine! But let's focus on the numbers. What do you think the net present value is?
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Delsie
10 months ago
Wait, did they say 'to the nearest $100'? Guess I better double-check my work.
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Madelyn
8 months ago
Yes, it should be $63,200 since we need to round to the nearest $100.
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Ngoc
9 months ago
I think the correct answer is $63,200.
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Lyla
9 months ago
I also calculated $63,200 as the net present value.
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Glenna
10 months ago
I got $63,200 as the net present value.
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Antonio
10 months ago
Alright, let's do this! I can already taste that sweet, sweet certification.
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Cherelle
10 months ago
Hmm, 7% cost of capital? That's a bit higher than I was expecting. I wonder if that's going to impact the final result.
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Brendan
10 months ago
This seems like a straightforward time value of money problem. I'll plug the numbers into the NPV formula and see what I get.
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Raelene
9 months ago
I got an NPV of $63,200. Looks like option A is the correct answer.
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Alline
9 months ago
Let's calculate the NPV using the formula.
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Leslee
10 months ago
I'm not sure about the answer. Can someone explain how the net present value is calculated in this case?
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Lavonna
11 months ago
I agree with Bok. The net present value calculation is based on the discounted cash flows using the cost of capital.
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Bok
11 months ago
I think the answer is A) 63200.
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