Bill Plans to Open a Do-It-Yourself Dog Bathing Center in a Storefront

question 241

Multiple Choice

Bill plans to open a do-it-yourself dog bathing center in a storefront. The bathing equipment will cost $160,000. Bill expects the after-tax cash inflows to be $40,000 annually for seven years, after
Which he plans to scrap the equipment and retire to the beaches of Jamaica.
Assume the required return is 10%. What is the project's discounted payback period?

• A) three years
• B) four years
• C) five years
• D) six years
• E) seven years

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Definitions:

Ownership

The state or condition of legally possessing an object, property, or enterprise.

Joint Venture

A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task.

New Market

Refers to an undiscovered or underexploited segment in the marketplace that a company can target to expand its customer base.

Strategic Alliance

A collaborative relationship between independent firms, though the partnering firms do not create an equity partnership; that is, they do not invest in one another.