The Owner of a Number of Gas Stations Is Considering

question 3

Multiple Choice

The owner of a number of gas stations is considering installing coffee machines in his gas stations. It will cost $260,000 to install the coffee machines, and they are expected to boost cash flows by $111,428 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) 1.17%
• B) 2.34%
• C) 4.69%
• D) 5.86%

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Definitions:

Moral Dilemmas

Situations in which individuals face conflicts between choosing two or more actions, where each option has moral implications.

Moral Reasoning

The process by which an individual thinks through ethical problems and arrives at principles of right and wrong.

Erik Erikson

Known for formulating a theory regarding the psychosocial growth of individuals, he is a distinguished psychoanalyst and developmental psychologist.

Lawrence Kohlberg

An American psychologist best known for his theory of stages of moral development, which explains the development of moral reasoning.