Cima P1 Exam Question No 21

Question No 21:

A company is considering investing in a project with an expected life of four years. The project has a positive net present value of $280,000 when cash flows are discounted at 12% per annum. The project’s estimated cash flows include net cash inflows of $320,000 for each of the four years. No tax is payable on projects of this type.
The percentage decrease in the estimated annual net cash inflows that would cause the company’s management to reject the project from a financial perspective is, to the nearest 0.1%:

A. 87.5%
B. 21.9%
C. 3.5%
D. 28.8%

Answer: D

Cima P1 Exam Question No 20

Question No 20:

An investment project requires an initial investment of $500,000 and has a residual value of $130,000 at the end of five years. The net present value of the project is $140,500 after discounting at the company’s cost of capital of 12% per annum.
The profitability index of the project is:

A. 0.38
B. 0.54
C. 0.28
D. 0.26

Answer: C

Cima P1 Exam Question No 19

Question No 19:

In finance, a bond is described as?

A. A negotiable instrument offering a fixed rate of interest over a fixed period of time and with a fixed redemption value.
B. A negotiable instrument which provides evidence of a fixed term deposit with a bank. Maturity is normally within 90 days but can be longer.
C. A document which sets out a commitment to pay a sum of money at a specified point in time.
D. An unsecured short term loan note issued by companies and generally maturing within a period of up to one year.

Answer: A

Cima P1 Exam Question No 18

Question No 18:

The material yield variance for August is:

A. $200 Adverse
B. $1,740 Adverse
C. $200 Favorable
D. $1,740 Favorable

Answer: B

Cima P1 Exam Question No 17

Question No 17:

BC had trade receivables of $242,000 at the start of the year. BC forecasts that the sales revenue for the year will be $1,500,000. All sales are on credit.
Trade receivable days at the end of the year are expected to be 60 days based on a 365 day year.
The expected receipts from customers during the year are closest to:

A. $1,495,425
B. $1,742,000
C. $1,253,425
D. $1,504,575

Answer: A

Cima P1 Exam Question No 16

Question No 16:

A company is considering offering its customers an early settlement discount. The company currently receives payments from customers on average 65 days after the invoice date. The company is considering offering a 2% early settlement discount for payment within 30 days of the invoice date.
The effective annual interest rate of the early settlement discount using compound interest methodology and assuming a 365 day year is:

A. 22.94%
B. 20.86%
C. 23.45%
D. 27.85%

Answer: C

Cima P1 Exam Question No 15

Question No 15:

AB is preparing its cash budget for the next quarter.
Which of the following items should NOT be included in the cash budget?

A. Payment of tax due on last year’s profits
B. Gain on the disposal of a piece of machinery
C. Repayment of the capital amount of a loan
D. Receipt of interest from short term investments

Answer: B