Rodriquez's Hot Rods Is Considering a New Project with an Initial

question 64

Multiple Choice

Rodriquez's Hot Rods is considering a new project with an initial cost of $26,410 and a discount rate of 8 percent.The project is expected to have one cash inflow of $42,500 in Year 2.What is the discounted payback period?

• A).72 years
• B)1.39 years
• C).62 years
• D)1.72 years
• E)1.62 years

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Definitions:

Incremental Cost

The additional cost associated with producing one more unit of output, useful for decision-making on production levels.

Opportunity Cost

The evasion of possible gains from diverse options by firmly deciding on one.

Alternative Foregone

The next best choice available to someone who has made a decision, also known as the opportunity cost.

Opportunity Costs

The financial downside to eschewing the next top alternative in the spectrum of choices.