You Have a Sub-Contracting Job with a Local Manufacturing Firm

question 14

Multiple Choice

You have a sub-contracting job with a local manufacturing firm. Your agreement calls for annual payments of $50,000 for the next five years. At a discount rate of 12%, what is this job worth to you today?

• A) $180,238.81
• B) $201,867.47
• C) $210,618.19
• D) $223,162.50
• E) $224,267.10

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Definitions:

Diversifiable Risk

A risk that can be reduced or eliminated from a portfolio through diversification, not linked to the market's movements as a whole.

Company-Specific

Company-Specific refers to factors or risks that affect an individual company's performance, distinct from broader market or industry factors.

Unsystematic Risk

The risk associated with a specific company or industry, which can be mitigated through diversification.

Beta Coefficient

A measure of a stock's volatility in relation to the overall market; a beta greater than 1 indicates higher than market volatility.