With a Cost-Reimbursement Type of Contract,the Greatest Risk Is Assumed

question 7

Multiple Choice

With a cost-reimbursement type of contract,the greatest risk is assumed by:

• A) the purchasing company.
• B) the vendor.
• C) both the purchasing company and the vendor.
• D) neither the purchasing company nor the vendor.

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Definitions:

Equivalent Annual Annuity

The Equivalent Annual Annuity is a financial concept used to evaluate the annual return on an investment that has a different payment schedule, by converting it into an annuity with the same total present value.

Mutually Exclusive Projects

Investment projects where the acceptance of one project prevents the acceptance of another.

Capital Budgeting

The process by which investors or management assess potential large expenditures or investments to determine their profitability.

Internal Rate of Return (IRR)

The discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.