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IMANET Certified Management Accountant Exam Questions

Exam Name: Certified Management Accountant
Exam Code: Certified Management Accountant
Related Certification(s): IMANET Certified Management Accountant CMA Certification
Certification Provider: IMANET
Actual Exam Duration: 120 Minutes
Number of Certified Management Accountant practice questions in our database: 1336 (updated: Jul. 09, 2024)
Expected Certified Management Accountant Exam Topics, as suggested by IMANET :
  • Topic 1: External Financial Reporting Decisions/ Financial Statement Analysis
  • Topic 2: Technology and Analytics/ Professional Ethics/ Internal Controls
  • Topic 3: Financial Planning, Performance, and Analytics
  • Topic 4: Strategic Financial Management/ Performance Management
  • Topic 5: Planning, Budgeting, and Forecasting/ Investment Decisions
  • Topic 6: Decision Analysis/ Risk Management/ Cost Management/ Corporate Finance
Disscuss IMANET Certified Management Accountant Topics, Questions or Ask Anything Related

Rex

8 days ago
Just passed the CMA exam! Cost allocation questions were tricky - focus on activity-based costing and its impact on decision-making. Understanding cost drivers is crucial. Thanks to Pass4Success for the spot-on practice questions that helped me prepare efficiently!
upvoted 0 times
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Galen

13 days ago
I recently passed the IMANET Certified Management Accountant exam with the help of Pass4Success practice questions. The exam covered topics such as External Financial Reporting Decisions and Financial Statement Analysis. One question that stood out to me was related to analyzing a company's financial statements to identify potential areas of improvement. Despite being unsure of the answer, I managed to pass the exam.
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Free IMANET Certified Management Accountant Exam Actual Questions

Note: Premium Questions for Certified Management Accountant were last updated On Jul. 09, 2024 (see below)

Question #1

Union Electric Company must clean up the water released from its generating plant. The company's cost of capital is 12 percent for average risk projects, and that rate is normally adjusted up or down by 2 percentage points for high- and low- risk projects. Clean-Up Plan A . which is of average risk, has an initial cost of $10 million, and its operating cost will be $1 million per year for its 10-year life. Plan B, which is a high-risk project, has an initial cost of $5 million, and its annual operating cost over Years 1 to 10 will be $2 million. What is the approximate PV of costs for the better project?

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Correct Answer: B

The cash flows of Plan A are discounted at 12%, the company's cost of capital for average risk projects. Plan B is evaluated with a lower cost of capital that reflects a greater risk of the cash outflow of the project. Thus, the cash flows of Plan B are discounted at 10% (12% --- 2%). the company's adjusted cost of capital for high risk projects. The net present value of each plan is the initial cost plus the present value of an annuity for 10 years at the appropriate rate multiplied times the annual operating cost.

The present value factors are found in the tools section of CMA Test Prep.

Plan A NPV = $10,000,000 + ($1,000,000 x 5.650)

Plan A NPV = $15,650,000

Plan B NPV = $5,000,000 + ($2,000,000 x 6.145)

Plan B NPV = $17,290,000

Plan A has a lower NPV and thus is the better project.


Question #2

The management of Pelican, Inc. is evaluating a proposed acquisition of a new machine at a purchase price of $180,000 and with installation costs of $10,000. A $9,000 increase in working capital will be required. The machine Will have a useful life of four years, after which it can be sold for $30,000. The estimated annual incremental operating revenues and cash operating expenses are $450,000 and $300.000, respectively, for each of the four years. Pelican's effective income tax rate is 40%. and the cost of capital is 12%. Pelican uses straight-line depreciation for both financial reporting and income tax purposes. If the project is accepted, the estimated incremental after-tax operating cash flows at the end of the first year wilt be?

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Correct Answer: B

The estimated incremental after-tax operating cash flows for each year of a capital project consist of two components: the after-tax cash inflows from operations and the depreciation tax shield arising from me purchase of new equipment. The first of these for Pelican can be calculated as follows:

Pelican's total incremental after-tax operating cash flows for each year of the project's

life is thus $106,000 ($90,000 + $16,000).


Question #3

Union Electric Company must clean up the water released from its generating plant. The company's cost of capital is 12 percent for average risk projects, and that rate is normally adjusted up or down by 2 percentage points for high- and low- risk projects. Clean-Up Plan A . which is of average risk, has an initial cost of $10 million, and its operating cost will be $1 million per year for its 10-year life. Plan B, which is a high-risk project, has an initial cost of $5 million, and its annual operating cost over Years 1 to 10 will be $2 million. What is the approximate PV of costs for the better project?

Reveal Solution Hide Solution
Correct Answer: B

The cash flows of Plan A are discounted at 12%, the company's cost of capital for average risk projects. Plan B is evaluated with a lower cost of capital that reflects a greater risk of the cash outflow of the project. Thus, the cash flows of Plan B are discounted at 10% (12% --- 2%). the company's adjusted cost of capital for high risk projects. The net present value of each plan is the initial cost plus the present value of an annuity for 10 years at the appropriate rate multiplied times the annual operating cost.

The present value factors are found in the tools section of CMA Test Prep.

Plan A NPV = $10,000,000 + ($1,000,000 x 5.650)

Plan A NPV = $15,650,000

Plan B NPV = $5,000,000 + ($2,000,000 x 6.145)

Plan B NPV = $17,290,000

Plan A has a lower NPV and thus is the better project.


Question #4

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

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Correct 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)].


Question #5

Which of the following is not a category of relevant cash flows'?

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Correct Answer: C

Relevant cash flows are a much more reliable guide when judging capital projects, since only they provide a true measure of a project's potential to affect shareholder value. The relevant cash flows can be divided into three categories. (1) net initial investment, (2) annual net cash flows, and (3) project termination cash flows. An incremental cash flow is the difference in cash received or disbursed resulting from selecting one option instead of another. It is not a category of relevant cash Bows.



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