CIMA Exam CIMAPRA19-F02-1 Topic 1 Question 93 Discussion

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

Question #: 93
Topic #: 1

Which of the following best describes the goal of WACC as a measure?

ATo work out the average return that is required by the company on its investments in order to satisfy all shareholders and debt holders.

BTo work out the average return that is required by the company on its investments in order to satisfy all shareholders.

CTo work out the average return that is required by the company on its investments in order to satisfy all debt holders.

DTo work out the minimum return that is required by the company on its investments in order to satisfy all shareholders and debt holders.

Show Suggested Answer

Suggested Answer: A

by Isadora at Jul 12, 2024, 02:41 PM

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Peter

4 months ago

A) is the correct answer, but I'm still trying to figure out how to pronounce 'WACC' without sounding like a duck.

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Yuette

4 months ago

I wonder if the exam question includes a bonus round where we have to calculate the WACC using the Modigliani-Miller theorem and a financial calculator. That would be a real treat!

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Gerry

4 months ago

B) To work out the average return that is required by the company on its investments in order to satisfy all shareholders.

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Arminda

4 months ago

I hope not, that sounds complicated!

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Novella

4 months ago

A) To work out the average return that is required by the company on its investments in order to satisfy all shareholders and debt holders.

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Cordie

4 months ago

D) is wrong because WACC is not about the minimum return, but the average return required to satisfy all parties.

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Telma

4 months ago

C) To work out the average return that is required by the company on its investments in order to satisfy all debt holders.

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Timothy

4 months ago

B) To work out the average return that is required by the company on its investments in order to satisfy all shareholders.

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Reuben

4 months ago

A) To work out the average return that is required by the company on its investments in order to satisfy all shareholders and debt holders.

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Norah

5 months ago

B) is too narrow, as WACC should consider the needs of both shareholders and debt holders, not just shareholders.

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Madelyn

4 months ago

A) I agree, WACC should consider the needs of both shareholders and debt holders to determine the average return.

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Wade

4 months ago

D) To work out the minimum return that is required by the company on its investments in order to satisfy all shareholders and debt holders.

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Lauran

4 months ago

A) To work out the average return that is required by the company on its investments in order to satisfy all shareholders and debt holders.

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Percy

5 months ago

I think D is the correct answer because it mentions satisfying both shareholders and debt holders, but also specifies a minimum return.

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Tess

5 months ago

I'm not sure, but I think C could also be a valid option since it focuses on debt holders.

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Lashaunda

5 months ago

A) seems to be the most comprehensive answer. It takes into account the interests of both shareholders and debt holders, which is the true goal of WACC.

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