Solve the Problem. -Custom Dry Cleaners Owns a Building with a Replacement Cost

question 28

Multiple Choice

Solve the problem.
-Custom Dry Cleaners owns a building with a replacement cost of $239,000 which is insured for $162,520 with an 80% coinsurance clause. The building has a fire loss of $10,100. How much will the insurance company pay?

• A)$10,302
• B)$10,100
• C)$6,868
• D)$8,585

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Definitions:

Profitability Index

A calculation that measures the relative profitability of an investment, by dividing the present value of future cash flows by the initial investment cost.

Share Price

The current price at which a single share of a company's stock can be bought or sold in the financial markets.

Profitability Index

A financial tool used to determine the relative profitability of an investment, calculated as the present value of future cash flows divided by the initial investment cost.

Shareholder Wealth

The total value of all financial and capital assets owned by the shareholders of a company, aimed to be maximized through corporate strategies.