Page 9 - CIMA MCS Workbook May 2019 - Day 2

ADVANCED MANAGEMENT ACCOUNTING (P2) ‐ PRACTICE TASKS

TASK 3 – DEALING WITH RISK/UNCERTAINTY IN INVESTMENT
APPRAISAL

Trigger and Task

The Finance Director has sent the following email to you

To: Finance Manager

Date: Today

Subject: Evaluation of risk/uncertainty of projects

We’re currently considering a number of investment projects, one of which is to develop a new
model of house tailored to the growing UK market.

As the UK market for prefabricated housing is currently very small but has the potential to grow
significantly, there is a lot of uncertainty about how successful our introduction into this market
would be.

I’m going to concentrate on drafting some initial numbers for an investment appraisal, but I’d like
you to have a think about the techniques that we could use to incorporate the risk/uncertainty
into our recommendations for the project. Please could you put together some notes for me on
your thoughts?

Regards,

Carla Holm

Prepare the work that Carla has requested. (Time 45 minutes)

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