What Is the Value of the Project If the True

question 2

Multiple Choice

What is the value of the project if the true probabilities are used and the appropriate one period risk adjusted discount rate is used (assume the $80 annual cost does not exist) ?

• A) $169.65
• B) $201.42
• C) $233.73
• D) $288.64

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Definitions:

Average Collection Period

The average number of days it takes for a business to receive payments owed by its customers.

Average Collection Period (ACP)

A financial ratio that measures how long it takes to collect on credit sales. Also called days sales outstanding (DSO).

Credit Policy

A set of guidelines that a company follows to determine credit terms for customers, which encompass payment period, amount of credit, and the discount terms.

Cash Discount

A reduced price offered by a seller for goods or services if the buyer pays in cash, or within a specified time period, encouraging early payment.