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CIMA CIMAPRO19-P03-1 Exam
P3 Risk Management (Page 24 )

Updated On: 1-Feb-2026
Page 11 of 56
PDF with 276 Questions

YGH has recently completed a post completion audit on a five year contract that has only recently come to a conclusion. The main finding was that the project delivered most of the expected benefits, but that it cost significantly more to implement than had been anticipated at the project appraisal stage. YGH would not have proceeded if the true cost had been known at that stage. The project was the responsibility of the production department, which is presently managed by G. When the project was proposed, the production department was managed by H. H is now YGH's Director of Operations.

How should the finding from this post completion audit be interpreted?

  1. YGH should consider introducing more detailed checking of the assumptions underlying the costs of future projects.
  2. The production department should not be granted funding for future projects unless there are compelling reasons to proceed.
  3. G should be held accountable for the overspend on the project.
  4. H should be held accountable for the overspend on the project.

Answer(s): A



A UK based company is considering an investment of GB£1,000,000 in a project in the US

  1. It is anticipated that the following cash flows will arise from this project.
    The cash flows will be either US$400,000 with a probability of 40% or US$700,000 with a probability of 60% for each of the next three years; remitted to the UK at the end of each year.
    Currently GB£1.00 is worth US$1.30.
    The expected inflation rates in the two countries over the next four years are 2% in the UK and 4% in the US.
    Applying the Purchasing Power Parity Theory, which of the following represents the expected net present value of the project in GP£ (to the nearest whole pound)?
  2. GB£287,639
  3. GB£391,640
  4. GB£(111,973)
  5. GB£554,047

Answer(s): A



VBN's home currency is the V$. On 1 January, VBN must make a payment of C$2 million on 31 March of that same year.
On 1 January the spot exchange rate was V$1 = C$0.4.
On 1 January VBN paid $180,000 for a call option to buy C$2 million for V$5.5 million on 31 March.
VBN's cost of borrowing was 8% per year.
On 31 March the spot rate was V$1 = C$0.45.
What was the total cost, including the cost of the option, of settling the payable?

  1. V$4.628 million
  2. V$5.684 million
  3. V$4.444 million
  4. V$5.5 million

Answer(s): A



R plc is considering an investment of $1,100,000 in a new machine which is expected to have substantial cash inflows over the next five years.
The annual cash flows from this investment and their probability are shown below:
Annual cash flow ($) Probability
200,000 0.4
280,000 0.5
350,000 0.1
At the end of its five-year life, the asset is expected to sell for $100,000. The cost of capital is 5%.
What is the Expected Net Present Value?
Give your answer to the nearest whole $.

  1. $82295, $82550

Answer(s): A



D has decided to invest in a new factory at a cost of $6,000,000. The discount rate of the project is 22% and the PV of tax shield is $80,000.
What is the IRR?
Give your answer to two decimal places.

  1. 21.71%

Answer(s): A



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