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CIMA CIMAPRA19-P03-1 Exam Questions
P3 Risk Management (Online) (Page 6 )

Updated On: 15-Feb-2026
Page 6 of 56
PDF with 275 Questions

A project has a net present value of $2 million.
Total cash outflows of this project have a present value of $14 million, which includes staff costs of

$10 million.
What is the project's sensitivity to staff costs?

  1. 20%
  2. 63%
  3. 71%
  4. 14%

Answer(s): A



P Ltd, a manufacturing company, is considering a new capital investment project to set up a new production line. The initial appraisal shows a healthy net present value of $6,465 million at a discount rate of 10% as shown in the table below:
However, management is unsure about the demand for the product which will be produced and has insisted that the future revenues should be reduced to certainity equivalents by taking 70%, 65% and 60% of the years 1,2, and 3 cash inflows respectively.
What should P do?

  1. Proceed with the project, it has a healthy net present value.
  2. Stop the project, it has considerable risk.
  3. Put pressure on sales and marketing to re-verify their forecasts.
  4. Re-appraise the project using other capital appraisal techniques to get a more balanced view.

Answer(s): D



A capital investment project shows a NPV of £3,450 at a discounted rate of 8% and an NPV of £1,210 at a discounted rate of 9%.
What is the internal rate of return?

  1. 11.85%
  2. 10.85%
  3. 10.54%
  4. 9.54%

Answer(s): D



Return on capital employed (ROCE) can be a useful measure of divisional performance. For which of the following types of company is ROCE likely to be most appropriate?

  1. Companies in which there is extensive investment in intellectual property and intangible assets, such as brands and trade marks.
  2. Companies in which there is extensive investment in physical assets, such as plant and machinery, with divisions which undertake broadly similar activities.
  3. Companies which have been created by extensive acquisition and merger activity and include divisions engaged in a variety of activities.
  4. Companies in the not-for-profit sector.

Answer(s): B



Which TWO of the following are benefits of carrying out a post-completion audit of capital projects?

  1. A post-completion audit can help find out who was to blame for a project exceeding the budget.
  2. A post-completion audit can help management understand what went wrong with a project in order to try and prevent the same problem occurring in the future.
  3. A post-completion audit can help find out where a project went wrong so it can be fixed immediately.
  4. A post-completion audit can investigate variances from the budget on completed projects.

Answer(s): B,D






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