A Security Firm Is Offered $80,000 in One Year for Providing

question 66

Multiple Choice

A security firm is offered $80,000 in one year for providing CCTV coverage of a property.The cost of providing this coverage to the security firm is $74,000,payable now,and the interest rate is 8.5%.Should the firm take the contract?

• A)Yes,since net present value (NPV)is positive.
• B)It does not matter whether the contract is taken or not,since NPV = 0.
• C)Yes,since net present value (NPV)is negative.
• D)No,since net present value (NPV)is negative.
• E)No,since net present value (NPV)is positive.

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Definitions:

Value-based Pricing

A pricing strategy where the price of a product or service is determined by the perceived value to the customer rather than the cost of production or market prices.

Forklift

A powered industrial vehicle used to lift and move materials over short distances.

Operating Cost

Expenses associated with the day-to-day operations of a business, excluding costs related to the production of goods.

Useful Life

The estimated period over which an asset is expected to be usable by the entity, affecting depreciation calculations.