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CIMA BA2 Practice Test Chapter 14 - Long-term decision making
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CIMA BA2 Practice Test Chapter 14 - Long-term decision making
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BA 2 - Fundamentals of Management AccountingPractice questions
Long-term decision making
Chapter fourteen
BA 2 - Long-term decision making. Quantia Learning
, 1
01. LMN are considering two projects. Both cost $450,000 and only one may be undertaken.
LMN use the payback method for appraising investments and require payback within
three years.
The details of the cash flows for the two projects are given:
Year Project A Project B
$000 $000
1 200 50
2 150 120
3 100 190
4 50 310
5 20 260
Advise LMN which project they should undertake.
02. BCD is considering a project which requires an initial investment of $500,000. The
following profits have been forecast for the life of the project.
These profit figures have taken account of annual depreciation which has been
calculated as $15,000 per annum.
Year Cash flow
$
1 90,000
2 120,000
3 150,000
4 130,000
The company uses payback to appraise investments and requires a payback within 3
years.
BA 2 - Long-term decision making. Quantia Learning
, 2
Calculate the payback for the investment in years and months and advise if BCD should
accept the project.
The payback for the investment is ________ years ________ months.
The investment should be accepted/rejected.
03. An investment of $1 million is expected to generate net cash inflows of $200,000 each
year for the next 7 years.
Calculate the payback period for the project.
04. $5,000 is invested in an account earning 2.75% interest p.a.
Calculate the account value after 12 years.
05. $5,000 is invested for 10 years in an account earning 5% interest p.a.
Calculate how much this will be worth at the end of the 10 years.
06. Calculate the present value of $2,000 receivable in 6 years’ time, if the interest rate is
10% p.a.
07. Miss K can either receive $12,000 in 2 years' time or $14,000 in 4 years' time. The
interest rate is 6% p.a.
Advise Miss K which receipt she should select.
BA 2 - Long-term decision making. Quantia Learning
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