Use the Following Information to Answer the Question(s)below

question 107

Multiple Choice

Use the following information to answer the question(s) below.
Suppose that you have received two job offers.Rearden Metal offers you a contract for $75,000 per year for the next two years while Wyatt Oil offers you a contract for $90,000 per year for the next two years.Both jobs are equivalent.Suppose that Rearden Metal's contract is certain,but Wyatt Oil has a 60% chance of going bankrupt at the end of the year.In the event that Wyatt Oil files for bankruptcy,it will cancel your contract and pay you the lowest amount possible for you to not quit.If you do quit,you expect you could find a new job paying $75,000 per year,but you would be unemployed for four months while searching for this new job.
-If you take the job with Wyatt Oil,then,in the event of bankruptcy,the least amount that Wyatt Oil would pay you next year is closest to:

• A)$45,000.
• B)$50,000.
• C)$54,000.
• D)$75,000.

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Definitions:

Depreciation

Depreciation is the systematic allocation of the cost of a tangible asset over its useful life, reflecting its wear and tear, obsolescence, or decline in value over time.

Cost Allocation

The process of identifying, aggregating, and assigning costs to cost objects, such as products, services, or departments.

Residual Value

Residual value is the estimated amount that an asset will be worth at the end of its useful life, reflecting its expected salvage value.