CIMAPRO19-P03-1 Exam - Topic 2 Question 99 Discussion

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

Question #: 99
Topic #: 2

The board of OKN is considering an investment opportunity that will require the company to borrow a large amount in month 10 of the current financial year and to invest it immediately in property, plant and equipment. This investment has a positive net present value that justifies the risk, but the directors are reluctant to invest in the project.

Why might the directors be reluctant?

AThe return on capital employed for the year will be reduced if the investment is made.

BThe return on capital employed for the year will be increased if the investment is made.

CThe year's profit will be depressed by the amount of the investment.

DFuture profits will be depressed.

Show Suggested Answer

Suggested Answer: A

by Daron at Nov 23, 2025, 08:34 PM

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Mattie

12 hours ago

Wait, how can a positive NPV still lead to lower returns?

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Lucy

6 days ago

Totally agree, option C makes sense here.

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Odette

11 days ago

They might be worried about short-term profits taking a hit.

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Felix

16 days ago

I'm going to have to go with C. The directors probably don't want to see the year's profit take a hit from the investment.

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Alaine

21 days ago

B can't be right, that would make the directors happy to invest, not reluctant. I'm going with A or D.

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Adell

26 days ago

Haha, the directors must be really risk-averse if they're reluctant to invest in a project with a positive net present value. Maybe they're just afraid of change.

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Devora

1 month ago

I vaguely recall that making a big investment could lead to lower returns initially, but I can't remember if that’s what the directors are really concerned about.

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Paris

1 month ago

I feel like we practiced a similar question where the focus was on short-term vs. long-term impacts. Could the investment really depress future profits?

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Jesusa

1 month ago

I think the directors might be worried about how the investment will affect this year's profits, especially if it’s a significant amount.

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Dante

2 months ago

I remember discussing how a large investment could impact the return on capital employed, but I'm not sure if it would reduce or increase it.

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Alishia

2 months ago

I think the answer is C - the year's profit will be depressed by the amount of the investment. The directors are probably worried about how that will impact the company's stock price and shareholder perceptions in the short term.

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Letha

2 months ago

If the investment is made, it could depress the year's profit by the amount of the investment. That might be why the directors are reluctant, since they might be focused on short-term financial performance rather than long-term value creation.

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Cordelia

2 months ago

D seems like the correct answer to me. The directors are likely reluctant because the investment will depress future profits.

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Nadine

2 months ago

The key here is that the investment requires the company to borrow a large amount. The directors might be reluctant because they don't want to increase the company's debt levels, even if the investment has a positive NPV.

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Ettie

2 months ago

They might worry about reduced returns.

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Louvenia

3 months ago

I think the answer is A. The directors are probably worried that the investment will reduce the return on capital employed for the year.

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Reiko

3 months ago

I'm a bit confused by this question. It seems like the investment has a positive net present value, so I'm not sure why the directors would be reluctant. Maybe it has to do with the impact on the year's profit or future profits?

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Verona

3 months ago

I think the directors might be reluctant because the return on capital employed for the year will be reduced if the investment is made. That's my best guess based on the information provided.

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Kimbery

3 months ago

I see your point. A reduced return could make them hesitant.

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