CIMAPRO19-P03-1 Exam - Topic 6 Question 96 Discussion

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

Question #: 96
Topic #: 6

A project has been evaluated on the basis that it will cost $22 million and will have a net present value of $4.3 million The project has commenced and $5 millionof the $22 million has been invested. A problem has been discovered that will cost an additional $4.5 million to rectify. The $4.5 million will be payable immediately. What is theNPV of continuing with this project?

A-$5million

B-$0.2million

C$1million

D$4.8million

Show Suggested Answer

Suggested Answer: D

by Christiane at Aug 15, 2025, 04:38 AM

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Shonda

5 months ago

So, the new NPV is $4.3M - $4.5M = -$0.2M.

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Leontine

5 months ago

Adding $4.5 million costs a lot!

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Roxanne

6 months ago

Totally makes sense, negative NPV means it's a bad move now.

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Zoila

6 months ago

Wait, how can it be negative after spending $5M already?

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Lemuel

6 months ago

The initial NPV was $4.3 million.

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Madelyn

6 months ago

I feel like the answer might be D, but I'm not entirely confident. I think we need to subtract the $4.5 million from the original NPV, but I need to double-check my calculations.

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Ira

7 months ago

If the project originally had an NPV of $4.3 million, and we add the $4.5 million cost, I think it might drop below zero, but I can't recall the exact calculation.

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Rasheeda

7 months ago

This seems similar to a practice question we did about sunk costs. I think we shouldn't consider the $5 million already spent, but I'm a bit confused about how to adjust the NPV after the extra $4.5 million.

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Shalon

7 months ago

I remember that the NPV is calculated by taking the initial investment and subtracting any additional costs, but I'm not sure how to factor in the already invested amount.

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Na

7 months ago

Alright, let's see here. The key is figuring out how the extra $4.5 million impacts the overall NPV. I'm feeling pretty confident I can get the right answer.

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Tyra

7 months ago

Okay, I've got this. I just need to update the total project cost and then recalculate the NPV. Shouldn't be too bad.

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Novella

7 months ago

Hmm, I'm a bit confused on how to calculate the new NPV with the additional $4.5 million cost. I'll need to review the formula.

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Wade

8 months ago

This looks like a tricky one, but I think I can work through it step-by-step.

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Clorinda

9 months ago

Wait, if we've already spent $5 million and there's an additional $4.5 million needed, then the total cost is $9.5 million. Subtracting that from the original $4.3 million NPV would give us a negative NPV, so I'm going with B) -$0.2 million.

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Jacinta

9 months ago

Okay, so we have a project that has already cost $5 million, and now there's an additional $4.5 million needed to fix a problem. The original NPV was $4.3 million, so I'm thinking the answer is D) $4.8 million.

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