Free CIMAPRO19-P03-1-ENG Exam Questions - Easiest Way for Success

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Total 278 Questions | Updated On: Sep 11, 2024

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Question 1

H Ltdis a company providing postal and courier services to small businesses. Customers pay a monthly or annual subscription fee to use the service, plusaverysmall fee for each item delivered.

A year ago, H employed a newsalesteam. Their remuneration is dependent on the number of new customers they sign up. Sales increased dramatically in the first six months, but nowdifficulties are emerging such as new customers dropping their subscription once the initial period has expired; subscriber direct debits being returned unpaid; subscribers going out of business and other similar issues.

Which of the following would be appropriate to help resolve these problems?

A : Alter the pricing structure in order to increase the price for sending each item but decrease the subscription element of the fee.

B : Ensure that a credit check is carried outbefore a subscriber is accepted.

C : Reduce the rate of commission payable to any sales person who fails to sign up at least an agreedminimum number of customers each month.

D : Alter the commission arrangements so that commission is payable only when the subscriber signs up for a second year.

E : Preparing a monthly report for sales persons detailing the performance of each new customer they have signed up over the previous year.

Answer: A,B,D

Question 2

Which method of quantifying risk exposure can be used to calculate the maximum loss on a portfolio occurring within a period of time with a given probability?

A : Value at Risk

B : Regression analysis

C : Simulation

D : Expected value

Answer: D

Question 3

COM is a well established company in the construction industry The company was founded by the Mac family 30 years ago and several family members still serve on the Board The company obtained a listing five years ago The Board has an appropriate balance between executive and non-executive members It also has audit remuneration and nomination committees The average age of board members is 68

COM is profitable but profit margins have been falling steadily and this year's revenues are lower than it was achieved last year The Board recognis thai it does not have a long term strategy in place and has been losing business to newer, more aggressive competitors

Which THREE of the following statements are correct?

A : The remuneration committee should consider incentives such as share options to encourage the Board to focus on COM's long term strategy

B : The nomination committee should have had a succession plan in place for directors.

C : The nomination committee should be operating for the benefit of the directors.

D : The audit committee should have alerted the Board to the impact of falling profit margins

E : The non-executive directors should have challenged the lack of long term strategic planning

Answer: A,B

Question 4

P Ltd, a manufacturing company, is considering a new capital investment project to set up a new production line. The initial appraisal shows a healthy net present value of $6,465 millionat a discount rate of 10% as shown in the table below:

However, management is unsure about the demand for theproduct which will be produced and has insisted that the future revenues should be reduced to certainity equivalents by taking 70%, 65% and 60% of the years 1,2, and 3 cash inflows respectively.

What should P do?

A : Proceed with the project, it has a healthy net present value.

B : Stop the project, it has considerable risk.

C : Put pressure on sales and marketing to re-verify their forecasts.

D : Re-appraise the project using other capital appraisal techniques to get a more balanced view.

Answer: D

Question 5

RFG is considering a major expansion that will result in a more diversified business model.

At present, RFG's market capitalisation is $240 million. This is based on a beta of 1.6. The risk free rate is 4% and the market rate of return is 9%. RFG is financed entirely by equity. The company generates an annual cash surplus of $28.8 million.

The expansion will cost $50 million and will generate future cash flows of $12 million in perpetuity. This new business will reduce RFG's beta to 1.4.

Calculate the adjusted present value of the expansion.

A : $81 million

B : $131 million

C : $321 million

D : $59 million

Answer: A

Page: 1 / 56

Total 278 Questions | Updated On: Sep 11, 2024

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