CIMAPRO19-P02-1 P2 Advanced Management Accounting Exam Practice Test

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:

Company B, a video games developer, wants to use data to track the amount of traffic it receives on its social media pages. It specifically wants to find out the demographic it is most popular with on this platform, and

how it can branch out to different demographics through further advertising.

How best could the company use big data to expand its demographic reach?

Select ALL that apply.

Juan is looking to invest in the mining industry. He has narrowed his options down to two rival companies, both with sales of 200m. Company A has an EBIT of 10m whereas Company B has an EBIT of 14m.

This would suggest that Company B is the better investment but Juan is suspicious that Company B has more financial backing than Company A.

Which ratios will tell him which company will use his investment the best?

TTR Ltd plans to purchase a new plant for $1,000m on the 1st of January 20X6. The annual sales expected from the production of this plant is S400m per year. The plant has an expected life of five years. The financial accountant has computed the NPV of the project at $61.42m considering a discount rate of 10%. The marketing director wants to know the percentage drop in revenue that the sales team can afford before the project becomes unviable. Which of the following indicates the percentage required by the marketing

director?

A large supermarket is applying direct product profitability analysis to establish the profit earned by each of the products it sells.

Data for product P are as follows.

The shelf is stacked each time that all units are sold and there are no units of product P left unsold at the end of each day.

What is the direct product profit per unit of product P?

Give your answer to the nearest $0.01.

A company has a 31 December year end and pays corporation tax at a rate of 30%. Corporation tax is payable 12 months after the end of the year to which the cash flows relate. The company can claim tax allowable depreciation at a rate of 25% reducing balance. It pays $1 million for a machine on 31 December 20X4. The company's cost of capital is 10%.

What is the present value of the benefit of the first portion of tax allowable depreciation?

The net present value of the cost of operating a machine for the next 4 years is 6,340. The discount rate used is 10%.

What is the equivalent annual cost and the present value of the cost in perpetuity of operating this machine?

Use discount factors to 3 decimal places.