CIMA Exam CIMAPRO19-P01-1 Topic 9 Question 88 Discussion

Actual exam question for CIMA's CIMAPRO19-P01-1 exam

Question #: 88
Topic #: 9

Explain how probability analysis could be used to assess the risk of the evaluated projects.

Select all the true statements.

AThe company can determine a range of possible outcomes for each of the cash flows in the project, for example, a high, low and medium estimate of each cash flow could be determined.

BThe net present value (NPV) of the project, if all high, low or medium estimates occurred, can be calculated along with the combined probabilities of their occurrence.

CThe probabilities can be combined to calculate the expected value of each cash flow element and of the project as a whole

DThe NPVs of a sample range of possible outcomes and the probability of each NPV can be calculated. If a small sample is taken the distribution of outcomes can be used to calculate the zero activities deviation of the NPVs and the probability of success of the projects.

Show Suggested Answer

Suggested Answer: A, B, C

References:

by Cordelia at May 22, 2024, 12:25 AM

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Filiberto

6 months ago

This is a great question! Probability analysis is crucial for assessing project risk. I think all the options are pretty solid, though D might be a bit of a stretch depending on the sample size.

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Lavonna

5 months ago

C) The probabilities can be combined to calculate the expected value of each cash flow element and of the project as a whole

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Chandra

5 months ago

B) The net present value (NPV) of the project, if all high, low or medium estimates occurred, can be calculated along with the combined probabilities of their occurrence.

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Rodrigo

6 months ago

A) The company can determine a range of possible outcomes for each of the cash flows in the project, for example, a high, low and medium estimate of each cash flow could be determined.

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Altha

6 months ago

Haha, you know what they say, 'the only thing certain in life is uncertainty!' This question really drives that point home. I'd go with A, B, and C for a well-rounded analysis.

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Aja

6 months ago

It's true, uncertainty is always a factor to consider in project evaluation.

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Nana

6 months ago

Definitely, calculating the expected value of each cash flow element is crucial.

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Gearldine

6 months ago

I agree, A, B, and C cover all the bases for a thorough risk assessment.

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Soledad

6 months ago

Hmm, I'm not sure about option D. Calculating the probability distribution from a small sample size seems a bit risky to me. I'd want a larger sample to feel confident about the results.

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