CIMAPRA19-P03-1 Practice Questions

JHU has recently completed an eight year project. The project was evaluated at a discount rate of 10% and was accepted because the net present value was $18 million. In year 3 of the project there was a significant unexpected repair arising because of the implementation stage of the project was rushed and some checks on equipment were skipped to save time. The cost of this was $8 million. In year 8 of the project the costs of dismantling the project were $11 million more than anticipated because of unexpected changes to the law concerning disposal of industrial scrap. How should these findings be reflected in the post completion audit?

A UK manufacturing company has simultaneously: • purchased a put option to sell USD 1million at an exercise price of GBP1.00 = USD1.65 • sold a call option that grants the option holder the right to buy USD 1million at a price of GBP1.00 = USD1.61 (this option has the same maturity date as the put). Which of the following is a valid explanation for entering into these option positions?

There are many method for appraising capital projects. Select ALL correct statements.

Systems Development Lifecycle (SDLC) is used to manage risk within the development of new computer systems. Which THREE of the following are appropriate controls to manage risk within the SDLC Process?

James owns a small company which sometimes suffers from credit risk. Which of the following measures should he put in place to help reduce this risk?

Company W produces mobile phone components and has recently tendered for a substantial contract. The results of the tendering process will not become available until three months from now. If the company is successful it will require 2,000 units of a commodity which is currently traded in an open commodity market for $740 per unit. However, there has been speculation that this commodity could increase substantially in price over the next three months and so the company is considering purchasing the commodity now and storing it for three months. The funds to buy the commodity would be borrowed at an annual interest rate of 7% and the storage cost of the product would be $5.40 per unit per month. The storage costs would be paid at the end of the three month storage period. Which of the following represents the gain or loss (to the nearest thousand dollars) that will accrue to Company W assuming that the price of the commodity rises to $800 in three months' time?

MNB is a multinational IT company with headquarters in Asia and with operations in all continents. MNB is attempting to expand its operations in Europe. This is seen as a major challenge as the European market is very well developed and highly competitive. MNB develops and manufactures its own products. Parts and assemblies are sourced across Asia, America and Europe. These are sometimes purchased locally as a condition of a contract, but MNB aims to include as much of its own equipment as possible. Transfer prices between MNB's subsidiaries can be set in YEN, USD, EURO, GBP. Transfer prices are revised every month in line with production times as most goods are made on short order with sales cycles running at 3-4 months. What types of risk are being presented here?

A patient has been prescribed a new medicine by their physician. The medicine is accompanied by a leaflet describing potential adverse effects associated with taking it. Most of these potentially adverse effects are trivial, but the leaflet states that three patients in every 10,000 who take the medicine suffer a severe reaction requiring urgent medical attention. Which of the following statements is true?

K is a large mining company. In its risk report it states that there is a risk of accidents and injury because of the nature of the industry. It states that it has staff training in place and complies with all Health and Safety regulations but in spite of this there will still be a residual risk that accidents and injuries may occur. Which of the following statements are correct?

W is a construction company which undertakes large projects for governments and other clients worldwide.  Following extensive tendering processes, contracts are issued for successful tenders, and projects typically take three to five years to complete. Contracts are normally fixed-price and many have considerable penalty clauses. Which of the following would be appropriate policies and controls for W to implement?