Jill Has an Escalator Clause in Her Labor Contract That

question 41

Multiple Choice

Jill has an escalator clause in her labor contract that gives her a raise equal to the change in the consumer price index (CPI) . Last year she earned $40,000 and the CPI was 100. If the CPI this year is 110, her new salary is

• A) $40,100.
• B) $40,110.
• C) $44,000.
• D) $50,000.

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Definitions:

Rate of Return

The increase or decrease in value of an investment for a set duration, shown as a percentage of the original investment amount.

Present Value Factors

The numerical factors used in calculating the present value of future cash flows, based on a specific discount rate and time period.

Sunk Costs

Costs that have been incurred in the past, cannot be recouped, and are not relevant to future decisions.

Capital Investment Analysis

A financial analysis method used to evaluate the potential profits and risks of investment projects.