CIMA Exam CIMAPRO19-P03-1 Topic 1 Question 82 Discussion

Actual exam question for CIMA's CIMAPRO19-P03-1 exam

Question #: 82
Topic #: 1

P has decided to invest in a new warehouse at a cost of $2,000,000. The discount rate of the project is18% and the present value of the tax shield is 26,000.

What is the minimum acceptableInternal Rate of Return of the project?

A18%

B17.77%

C18.23%

D16.50%

Show Suggested Answer

Suggested Answer: B, C, D

by Linwood at Oct 19, 2024, 04:38 AM

Limited Time Offer

25%

Off

Get Premium CIMAPRO19-P03-1 Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Maira

3 months ago

Wait, did you guys remember to account for the fact that the warehouse is made of bricks and mortar? That should definitely affect the IRR. *scratches head* Anyway, I'm sticking with B) 17.77%.

upvoted 0 times

...

Izetta

3 months ago

Hmm, I'm not so sure. Shouldn't the minimum acceptable IRR be lower than the discount rate? I'll go with D) 16.50%.

upvoted 0 times

Melissia

2 months ago

Let's go with D) 16.50% then.

upvoted 0 times

...

Ardella

2 months ago

I'm not sure, but I think D) 16.50% makes sense.

upvoted 0 times

...

Cordelia

2 months ago

I agree, I think D) 16.50% is the correct option.

upvoted 0 times

...

Antonio

2 months ago

I think the minimum acceptable IRR should be lower than the discount rate.

upvoted 0 times

...

Dominga

4 months ago

Hold on, if the present value of the tax shield is $26,000, that should be factored into the equation as well. I'm going with C) 18.23%.

upvoted 0 times

Phuong

3 months ago

I agree, C) 18.23% seems like the correct choice considering the present value of the tax shield.

upvoted 0 times

...

Tammara

4 months ago

I think you're right, the present value of the tax shield should be considered. I also choose C) 18.23%.

upvoted 0 times

...

Lenna

4 months ago

I agree with Magnolia, the present value of the tax shield should be considered in determining the minimum acceptable Internal Rate of Return.

upvoted 0 times

...

Magnolia

4 months ago

I disagree, I believe it should be 17.77% because of the present value of the tax shield.

upvoted 0 times

...

Oliva

4 months ago

I think the answer is B) 17.77%. The discount rate is 18%, so the minimum acceptable Internal Rate of Return should be slightly lower than that.

upvoted 0 times

Verdell

3 months ago

I'm not sure, but I think it's D) 16.50% because the project cost is quite high and might affect the minimum acceptable Internal Rate of Return.

upvoted 0 times

...

Rosina

4 months ago

I see your point, but I still think it's B) 17.77% because the discount rate is the main factor in this calculation.

upvoted 0 times

...

Hillary

4 months ago

I think it's actually C) 18.23%, because the present value of the tax shield is also a factor in determining the minimum acceptable Internal Rate of Return.

upvoted 0 times

...

Dominga

4 months ago

I agree with you, the answer is B) 17.77%

upvoted 0 times

...

Von

5 months ago

I think the minimum acceptable Internal Rate of Return should be 18%.

upvoted 0 times

...