You Are Considering a Project Which Has Been Assigned a Discount

question 46

Multiple Choice

You are considering a project which has been assigned a discount rate of 8%. If you start the project today,you will incur an initial cost of $480 and will receive cash inflows of $350 a year for three years. If you wait one year to start the project,the initial cost will rise to $520 and the cash flows will increase to $385 a year for three years. What is the value of the option to wait?

• A) $15.23
• B) $17.08
• C) $18.67
• D) $20.20
• E) $50.20

Recognize the legal consequences of fraudulent misrepresentation and how it can affect contract validity.

Understand the concept and implications of mutual mistake in contract agreements.

Identify the elements required to prove duress and its effect on contracts.

Grasp the concept of scienter and its relevance in cases of fraud.

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Definitions:

Aging Schedule

A methodical layout of a company's accounts receivable broken down by their due dates, typically used to manage and identify overdue accounts that may become uncollectable.

Credit Cost Curve

A graphical representation of the trade-off between the credit costs against the recovery rate or the likelihood of default.

Credit Period

The time frame between the purchase of goods on credit and the payment for those goods, offered by suppliers to buyers as an incentive.

Credit Period

The Credit Period is the time frame during which a buyer can pay for goods or services purchased on credit without incurring interest charges.