Question: St. Lawrence Bus Lines is offered a contract for busing schoolchildren that will produce an annual profit of $70,000 for seven years. To fulfill the

St. Lawrence Bus Lines is offered a contract for busing schoolchildren that will produce an annual profit of $70,000 for seven years. To fulfill the contract, St. Lawrence would have to buy three buses at a total cost of $333,000. At the end of the contract, the resale value of the buses is estimated to be $80,000. Should St. Lawrence Bus Lines sign the contract if its cost of capital is:
a. 12%?
b. 14%?
c. 16%?

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