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CIMAPRO19-P02-1 Exam - Topic 9 Question 19 Discussion

An organization is considering purchasing a new machine which will cost $600,000. The new machine will generate cost savings of $200,000 each year for five years. The cost of capital is 12%.The profitability index (PI) for the investment in the new machine is:Give your answer to one decimal place.
A) 1.2, 0.2

CIMAPRO19-P02-1 Exam - Topic 9 Question 19 Discussion

Actual exam question for CIMA's CIMAPRO19-P02-1 exam
Question #: 19
Topic #: 9
[All CIMAPRO19-P02-1 Questions]

An organization is considering purchasing a new machine which will cost $600,000. The new machine will generate cost savings of $200,000 each year for five years. The cost of capital is 12%.

The profitability index (PI) for the investment in the new machine is:

Give your answer to one decimal place.

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Suggested Answer: A

by Teddy at May 06, 2022, 04:34 PM

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Regenia
10 months ago
I'm not sure about those numbers, seems too good to be true.
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Daniela
10 months ago
PI calculation shows it's 1.2, right?
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Latricia
11 months ago
Wait, how does the cost of capital affect this?
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Nieves
11 months ago
Totally agree, that's a solid return!
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Tegan
11 months ago
The cost savings are $200,000 per year.
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Beula
11 months ago
Running the tests right after a build makes a lot of sense to me. It's the best way to get fast feedback on the code changes and ensure they haven't introduced any regressions.
upvoted 0 times
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Ruthann
11 months ago
Okay, let's see. I'm pretty sure the scripts are in the domain's bin directory, but I'm not sure which subdirectory specifically.
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Yuonne
11 months ago
I've got a good handle on MoV, so I think I can tackle this question. The key is understanding that MoV should be used to clarify information and guide decision-making, not just measure value at the end. I'm confident option C is the correct answer.
upvoted 0 times
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