BAPv5

BAPv5 practice questions, page 2 of 2, with answer review and explanations.

Question 6

Discounted Cash Flow takes into account the broader financial context. If interest rates are to increase, the project viability (costs to develop, ROI, might be negatively impacted). An IT Manager has been asked to prepare the business case for an investment in a new software system. They have been asked by the Project Manager whether they will be undertaking the investment appraisal using the Payback or Discounted Cash Flow method. Which of the following factors would indicate that the Discounted Cash Flow method should be used?

  1. The cost of raising capital is nil.
  2. The Managing Director has asked for the business case to be indicative rather than detailed.
  3. Interest rates for deposits and borrowing are expected to increase.
  4. The company has substantial deposits at the bank, earning no interest.

Question 7

Fund42morrow Group is considering setting up a new company in the group to offer an innovative investment scheme aimed at encouraging people under 18 to save for their future. It has identified that the proposed new company must have regulatory approval and significant investment. In which area of Porter’s Five Forces model would a competitor record this activity?

  1. Bargaining power of suppliers.
  2. Threat of substitute products.
  3. Bargaining power of customers.
  4. Threat of new entrants.