The Owner of a Number of Gas Stations Is Considering

question 39

Multiple Choice

The owner of a number of gas stations is considering installing coffee machines in his gas stations.It will cost $280,000 to install the coffee machines,and they are expected to boost cash flows by $120,000 per year for their five-year working life.What must the cost of capital be if this investment has a profitability index of 1?

• A)1.06%
• B)2.34%
• C)4.69%
• D)5.28%

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Definitions:

Minor Children

Individuals under the age of legal adulthood, whose rights and responsibilities are significantly different from those of adults.

Legally Binding Contract

An agreement between parties that is enforceable by law.

Acceptance

The act of agreeing to the terms of an offer, contract, or proposal, thereby creating a binding agreement.

Capacity

The legal ability to enter into a binding contract.