CIMA Exam CIMAPRO19-P01-1 Topic 2 Question 91 Discussion

Actual exam question for CIMA's CIMAPRO19-P01-1 exam

Question #: 91
Topic #: 2

Explain how probability analysis could be used to assess the risk of the evaluated projects.

Select all the true statements.

AThe company can determine a range of possible outcomes for each of the cash flows in the project, for example, a high, low and medium estimate of each cash flow could be determined.

BThe net present value (NPV) of the project, if all high, low or medium estimates occurred, can be calculated along with the combined probabilities of their occurrence.

CThe probabilities can be combined to calculate the expected value of each cash flow element and of the project as a whole

DThe NPVs of a sample range of possible outcomes and the probability of each NPV can be calculated. If a small sample is taken the distribution of outcomes can be used to calculate the zero activities deviation of the NPVs and the probability of success of the projects.

Show Suggested Answer

Suggested Answer: A, B, C

References:

by Youlanda at Jul 03, 2024, 07:25 AM

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Denny

5 months ago

Haha, reminds me of that time I tried to calculate the probability of winning the lottery. Spoiler alert: it's not great. But Option D sounds like the way to go here.

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Paola

5 months ago

This question is making my head spin, but I think Options B and C together would give a pretty comprehensive risk assessment. Better than just guessing, that's for sure!

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Bo

4 months ago

Probability analysis definitely adds a more scientific approach to evaluating project risks.

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Ocie

4 months ago

Agreed, it helps to have a range of outcomes and their probabilities to assess the risk.

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Glory

4 months ago

Definitely, calculating the NPV with different probabilities and expected values is key.

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Annelle

4 months ago

I think Options B and C together would give a pretty comprehensive risk assessment.

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Brandon

5 months ago

Ah, classic probability problem. I'd go with Option D - getting a sample range of NPVs and their probabilities could really help paint the picture of the project's risk profile.

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Melina

5 months ago

Option C is key here - determining the expected value for each cash flow element and the project as a whole is crucial for understanding the potential outcomes.

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Gaston

4 months ago

C) The probabilities can be combined to calculate the expected value of each cash flow element and of the project as a whole

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Stefania

4 months ago

B) The net present value (NPV) of the project, if all high, low or medium estimates occurred, can be calculated along with the combined probabilities of their occurrence.

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Frank

4 months ago

A) The company can determine a range of possible outcomes for each of the cash flows in the project, for example, a high, low and medium estimate of each cash flow could be determined.

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King

4 months ago

C) The probabilities can be combined to calculate the expected value of each cash flow element and of the project as a whole

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Vallie

5 months ago

B) The net present value (NPV) of the project, if all high, low or medium estimates occurred, can be calculated along with the combined probabilities of their occurrence.

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Lonny

5 months ago

A) The company can determine a range of possible outcomes for each of the cash flows in the project, for example, a high, low and medium estimate of each cash flow could be determined.

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Deeann

5 months ago

I agree, combining probabilities to calculate the expected value of the project as a whole is key.

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Virgilio

5 months ago

Calculating the expected value of each cash flow element is crucial for making informed decisions.

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Elfrieda

5 months ago

Hmm, using probability analysis to assess project risk seems like a logical approach. Option B looks promising, calculating the NPV for different scenarios and their probabilities could give a good sense of the overall risk.

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