Having carried out a full capital appraisal for a construction project, H Company has approved the project with...

Vendor: CIMA
Product: P3
Update on: Jul 29, 2025
Questions: 339

CIMA P3 Question Answer

Having carried out a full capital appraisal for a construction project, H Company has approved the project with initial outflows of $6,000,000 and a net present value of $1,200,000.

The implementation phase has been commenced with 25% of the costs already committed. However when the ground was opened, an underground waterway was revealed which will need to be diverted if the project is to proceed. Work to carry out this diversion has been estimated at $1,300,000.

Which of the following factors will define whether the project should go ahead or not?

The project actually has a higher NPV than before.

The project now has a negative NPV.

Abandoning the project will have an adverse effect on shareholder confidence.

There will be abandonment costs to restore the site.

There may be other unexpected costs to be met if the project continues.