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CIMAPRO19-P03-1 Exam - Topic 1 Question 82 Discussion

Actual exam question for CIMA's CIMAPRO19-P03-1 exam
Question #: 82
Topic #: 1
[All CIMAPRO19-P03-1 Questions]

P has decided to invest in a new warehouse at a cost of $2,000,000. The discount rate of the project is18% and the present value of the tax shield is 26,000.

What is the minimum acceptableInternal Rate of Return of the project?

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Suggested Answer: B, C, D

by Linwood at Oct 19, 2024, 04:38 AM

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Quentin
3 months ago
17.77% seems too precise to be right.
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Kasandra
3 months ago
Wait, how does the tax shield affect this?
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Roxane
4 months ago
I think it might be a bit lower than 18%.
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Kanisha
4 months ago
Definitely going with option A!
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Gabriele
4 months ago
The discount rate is 18%, so IRR should be at least that.
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Martha
4 months ago
I vaguely recall that the tax shield can affect the IRR, but I can't remember how to factor that into the calculation. This is tricky!
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Huey
5 months ago
I feel like I saw a similar question in our practice exam, and it had a slightly different IRR calculation. I might be leaning towards option C, but I'm not entirely confident.
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Tess
5 months ago
I think the minimum acceptable IRR is supposed to be at least equal to the discount rate, which is 18%. So maybe option A?
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Xuan
5 months ago
I remember we discussed how the IRR should be compared to the discount rate, but I'm not sure how to calculate it exactly in this case.
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Noemi
5 months ago
Okay, let me think this through. The discount rate is 18%, but the present value of the tax shield is $26,000. That means the actual IRR must be higher than 18% to make the project worthwhile. I'm going to try to calculate the exact minimum IRR.
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Lisbeth
5 months ago
I'm a little confused here. The question is asking for the minimum acceptable IRR, but the discount rate is also 18%. Are those the same thing, or am I missing something?
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Florencia
5 months ago
I've got this! The discount rate is 18%, and the present value of the tax shield is $26,000. So the minimum acceptable IRR must be 18%, right?
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Cordelia
5 months ago
Hmm, this looks tricky. I'm not totally sure how to approach this, but I'll give it my best shot. Maybe I can work backwards from the discount rate and tax shield information.
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Vivienne
5 months ago
Okay, let's think this through step-by-step. We need to find the minimum acceptable Internal Rate of Return (IRR) for this project, given the discount rate and present value of the tax shield.
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Maira
10 months ago
Wait, did you guys remember to account for the fact that the warehouse is made of bricks and mortar? That should definitely affect the IRR. *scratches head* Anyway, I'm sticking with B) 17.77%.
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Izetta
10 months ago
Hmm, I'm not so sure. Shouldn't the minimum acceptable IRR be lower than the discount rate? I'll go with D) 16.50%.
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Melissia
9 months ago
Let's go with D) 16.50% then.
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Ardella
9 months ago
I'm not sure, but I think D) 16.50% makes sense.
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Cordelia
9 months ago
I agree, I think D) 16.50% is the correct option.
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Antonio
9 months ago
I think the minimum acceptable IRR should be lower than the discount rate.
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Dominga
11 months ago
Hold on, if the present value of the tax shield is $26,000, that should be factored into the equation as well. I'm going with C) 18.23%.
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Phuong
10 months ago
I agree, C) 18.23% seems like the correct choice considering the present value of the tax shield.
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Tammara
10 months ago
I think you're right, the present value of the tax shield should be considered. I also choose C) 18.23%.
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Lenna
11 months ago
I agree with Magnolia, the present value of the tax shield should be considered in determining the minimum acceptable Internal Rate of Return.
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Magnolia
11 months ago
I disagree, I believe it should be 17.77% because of the present value of the tax shield.
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Oliva
11 months ago
I think the answer is B) 17.77%. The discount rate is 18%, so the minimum acceptable Internal Rate of Return should be slightly lower than that.
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Verdell
10 months ago
I'm not sure, but I think it's D) 16.50% because the project cost is quite high and might affect the minimum acceptable Internal Rate of Return.
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Rosina
10 months ago
I see your point, but I still think it's B) 17.77% because the discount rate is the main factor in this calculation.
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Hillary
10 months ago
I think it's actually C) 18.23%, because the present value of the tax shield is also a factor in determining the minimum acceptable Internal Rate of Return.
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Dominga
10 months ago
I agree with you, the answer is B) 17.77%
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Von
11 months ago
I think the minimum acceptable Internal Rate of Return should be 18%.
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