CIMA Exam CIMAPRO19-P02-1 Topic 5 Question 105 Discussion

Actual exam question for CIMA's CIMAPRO19-P02-1 exam

Question #: 105
Topic #: 5

You have just assessed an investment proposal, involving an immediate cash outflow followed by a series of cash inflows over the next 7years, by deducing the NPV and the IRR. You have now discovered that you have

underestimated the discount rate.

Correcting the underestimation will have the following effect, relative to your original deductions:

ANPV will reduce, IRR will not change

BNPV and IRR will not change

CNPV will increase, IRR will reduce

DNPV and IRR will both increase

ENot enough information given for an answer

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Suggested Answer: A

by Jeffrey at Jan 09, 2025, 04:51 PM

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Milly

5 days ago

Hmm, if we underestimated the discount rate, that's gonna knock down the NPV for sure. But the IRR? I'm not so sure about that one.

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Gertude

6 days ago

Hmm, that's an interesting perspective. I guess we'll have to wait and see what the correct answer is.

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Pearly

9 days ago

I disagree, I believe both NPV and IRR will increase when the discount rate is corrected.

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Gertude

11 days ago

I think correcting the underestimation of the discount rate will increase the NPV but reduce the IRR.

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