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:

ESP

Short for extrasensory perception, it refers to the purported ability to acquire information without using the known five senses.

Parapsychology

A field of study concerned with investigating paranormal and psychic phenomena which fall outside recognized scientific explanations, such as telepathy, precognition, and clairvoyance.

Perception

The process by which individuals organize and interpret their sensory impressions to give meaning to their environment.

Precognition

The purported psychic ability to see or know about events before they happen, which lacks empirical support in the scientific community.