Roger Is a Finish Carpenter Who Is in High Demand

question 113

Multiple Choice

Roger is a finish carpenter who is in high demand because of the outstanding quality of his work. The AB Construction Co. is trying to get an exclusive contract for his work for the next two years. As an enticement, they are offering to pay him a lump sum today in exchange for his services for the next two years. Currently, Roger is prepaid on a monthly basis at a rate of $18,000 per month. What is the minimum contract amount that AB Construction can get Roger to consider if he refuses to take a pay cut? The applicable discount rate is 7.8%?

• A) $375,000
• B) $400,000
• C) $425,000
• D) $450,000
• E) $475,000

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Definitions:

Supply Chain Management

The management of products, information, and monetary assets as they progress from suppliers to manufacturers, then wholesalers, retailers, and ultimately consumers.

Gross Margin

A financial metric that represents the difference between sales revenue and the cost of goods sold, expressed as a percentage of sales revenue, indicating the profitability of a company's core activities.

Subcontractors

Independent entities hired by a primary contractor to perform a specific task as part of a larger project.

Distribution Center

A facility for the receipt, storage, and redistribution of goods to company stores or customers; may be operated by retailers, manufacturers, or distribution specialists.