IMANET CMA Exam - Topic 5 Question 81 Discussion

Actual exam question for IMANET's CMA exam

Question #: 81
Topic #: 5

[All CMA Questions]

The Hopkins Company has estimated that a proposed project's 10-year annual net cash benefit, received each year end. will be $2,500 with an additional terminal benefit of $5,000 at the end of the 10th year. Assuming that these cash inflows satisfy exactly Hopkins' required rate of return of 8%, calculate the initial cash outlay

A$16,775

B$19,090

C$25,000

D$30,000

Show Suggested Answer

Suggested Answer: B

If the 8% return exactly equals the present value of the future flows ., NPV is zero), then simply determine the present value of the future inflows. Thus, Hopkins Company's initial cash outlay is $19,090 [($2,500)(PVIFA at 8% for 10 periods) + ($5J00)(PVlF at 8% for 10 periods ($2,500)(6.710) + ($5,000)(.463)].

by Ceola at Feb 08, 2024, 05:44 AM

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Fernanda

3 months ago

I agree, seems like a solid estimate!

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Nicholle

3 months ago

Wait, how can the outlay be that high?

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Ellen

3 months ago

Definitely going with option B!

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Tashia

4 months ago

I think the initial cash outlay is around $19,090.

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Dalene

4 months ago

The annual cash benefit is $2,500.

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Micheline

4 months ago

I think the answer is around $19,090, but I’m not entirely confident. I need to double-check my calculations for the terminal benefit.

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Sena

4 months ago

I feel like I might be overthinking this. Is the initial cash outlay just the sum of the present values of the cash benefits?

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Nada

4 months ago

This question seems similar to the practice problems we did on cash flows. I think we need to discount both the annual cash flows and the terminal value.

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Pearly

5 months ago

I remember we calculated present value in class, but I'm not sure how to factor in the terminal benefit correctly.

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Samuel

5 months ago

This is a straightforward present value calculation. I'll just need to plug the numbers into the formulas and do the math. I'm confident I can get the right answer.

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Tiera

5 months ago

Okay, I think I've got this. I'll use the present value of an annuity formula to find the present value of the $2,500 annual cash inflows, and then add the present value of the $5,000 terminal benefit. That should give me the initial cash outlay.

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Kristal

5 months ago

Hmm, I'm a bit confused on how to approach this. I know it has something to do with present value, but I'm not sure which formulas to use. I'll have to think this through carefully.

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Barney

5 months ago

This looks like a present value calculation problem. I'll need to use the annuity formula and the lump sum formula to find the initial cash outlay.

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Bev

5 months ago

Alright, let me think this through step-by-step. I need to find the present value of the annuity and the present value of the terminal benefit, then add them together. As long as I'm careful with the calculations, I should be able to get the correct initial cash outlay.

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Johnathon

5 months ago

Okay, I've got this. Adjudication, arbitration, and mediation are all forms of alternative dispute resolution, while litigation is the traditional court-based process. Based on the context, I think arbitration is the best choice for box 7.

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Myra

5 months ago

Hmm, I'm a little unsure about this one. I know MODE_PRIVATE has something to do with data privacy, but I'm not sure of the exact details. I'll need to review my notes on shared preferences before answering.

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Josphine

5 months ago

Okay, I think I've got it. I need to find the number of repeat orders placed online and divide it by the total number of sales. Let me double-check my work before submitting the answer.

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Willie

5 months ago

I'm a bit confused by the options here. Conversion, Calculation, Tracking, and Bounce - I'm not sure which one is the correct term. I'll have to re-read the question closely.

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Mila

5 months ago

I've got this! The diagram clearly shows a many-to-many relationship between the two entities, so the answer must be B. m:n.

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Dexter

5 months ago

Okay, let's see. With the requirements still in flux, I'll want to make the components as modular and extensible as possible. I'll choose weak coupling, strong cohesion, and open for extension.

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