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:

Electronic Form

Digital or electronic format of documents or data, enabling electronic handling, storage, and transfer.

Enforceable

Pertains to a contract or obligation that is legally binding and can be upheld in a court of law.

Parol

Oral or verbal evidence, not recorded in writing, used to explain the terms of a contract.

Both Parties

Referring to the two entities or individuals involved in an agreement, contract, or negotiation.