CIMA Exam CIMAPRA19-F02-1 Topic 1 Question 38 Discussion

Actual exam question for CIMA's CIMAPRA19-F02-1 exam

Question #: 38
Topic #: 1

XYhas a weighted average cost of capital (WACC) of 10% based on its gearing level (measured as debt/debt+equity) of 40%. It is considering a signficant new project.

In which of the following situations would it be appropriate to appraise this project using XY's existing WACC of 10%?

AThe project is in a different industry to XY's current operations and funded entirely by equity.

BThe project is an extension of XY's current operations and is funded 40% by debt and 60% by equity.

CThe project is an extension of XY's current operations and is funded by equal amounts of debt and equity.

DThe project is in a different industry to XY's current operations and is funded by equal amounts of debt and equity.

Show Suggested Answer

Suggested Answer: B

by Rasheeda at May 08, 2022, 03:06 AM

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