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CIMAPRO19-P03-1 Exam - Topic 2 Question 103 Discussion

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?
A) The return on capital employed for the year will be reduced if the investment is made.
B) The return on capital employed for the year will be increased if the investment is made.
C) The year's profit will be depressed by the amount of the investment.
D) Future profits will be depressed.

CIMAPRO19-P03-1 Exam - Topic 2 Question 103 Discussion

Actual exam question for CIMA's CIMAPRO19-P03-1 exam
Question #: 103
Topic #: 2
[All CIMAPRO19-P03-1 Questions]

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?

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Suggested Answer: A

by Latanya at Mar 30, 2026, 10:16 PM

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Henriette
Wait, how can a positive NPV still make them hesitant?
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Carline
2 months ago
Totally agree, big investments can hurt short-term profits.
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Myra
2 months ago
They might be worried about cash flow issues.
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Frederic
2 months ago
I vaguely remember that a significant investment could lead to a temporary dip in profits, so maybe option C is the right choice after all.
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Hollis
3 months ago
I feel like the directors might be worried about future profits being affected, which could relate to option D, but I can't recall the details.
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Gertude
3 months ago
I think we practiced a similar question where the immediate costs affected the year's profit, so option C might be relevant here.
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Earleen
3 months ago
I remember discussing how a large investment can impact return on capital employed, but I'm not sure if it would reduce or increase it in this case.
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