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Internal rate of return. ABC firm sellsextended warranties for its washing machines. When

Internal rate of return. ABC firm sellsextended warranties for its washing machines. When

Internal rate of return. ABC firm sellsextended warranties for its washing machines. When ABC sells thewarranty, it receives cash upfront, but later ABC must cover anyrepair costs that arise. ABC is considering a warranty for a newline of TVs. A consumer who purchases the 2-year warranty will payABC $200. The repair costs that ABC must cover will average $106for each of the warranty's 2 years. If ABC has a cost of capital of7%, should it offer this warranty for sale?

Abhinav 04-Dec-2019

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