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AACE International Exam CCP Topic 4 Question 22 Discussion

Actual exam question for AACE International's CCP exam
Question #: 22
Topic #: 4
[All CCP Questions]

A used concrete pumping truck can be purchased for $125,000. The operation costs are expected to be $65,000 the first year and increase 5% each year thereafter. As a result of the purchase, the company will see an increase in income of $100,000 the first year and 5% more each subsequent year. The company uses straight-line depreciation. The truck will have a useful life of five (5) years and no salvage value. Management would like to see a 10% return on any investment. The company's tax rate is 28%.

Is a rise in the price level of a good or service, or market basket of goods and/or services.

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Suggested Answer: D

Given that the average life span of the lithium battery is 24 months with a standard deviation of 2 months, we need to calculate the probability that the battery will last between 20 and 26 months.

Using the Z-score formula:

Z=XZ = \frac{X - \mu}{\sigma}Z=X

For 20 months: Z=20242=2Z = \frac{20 - 24}{2} = -2Z=22024=2

For 26 months: Z=26242=1Z = \frac{26 - 24}{2} = 1Z=22624=1

Looking up these Z-scores in the standard normal distribution table:

Z = -2 corresponds to approximately 2.28%

Z = 1 corresponds to approximately 84.13%

The probability that the battery will last between 20 and 26 months is approximately 84%.


by Asarudeen at Feb 14, 2025, 04:17 PM

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Tamekia
13 days ago
I'm going with 'C) incremental costs'. It's got that nice, business-y ring to it. Plus, who doesn't love a good ol' cost increase? It's like the inflation of the corporate world.
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Angelo
16 days ago
Definitely 'D) inflation'. It's the only option that actually makes sense given the information provided. Although, I do appreciate the subtle humor in the question. Who doesn't love a good 'rise in the price level' joke?
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Annmarie
1 days ago
I think it's 'D) inflation' too. The increase in income and operation costs going up each year definitely points to inflation.
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Ricarda
22 days ago
Ooh, 'B) deflation' sounds like the way to go. I mean, if prices are going down, that's gotta be better than inflation, right? Although, now that I think about it, that doesn't really make sense in this context. Ah well, I'll take a guess!
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Gearldine
23 days ago
I'm going with 'A) escalation'. It just sounds more technical and fancy than 'inflation', you know? Plus, who wants to be basic when you can be escalated?
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Domitila
25 days ago
Hmm, the correct answer is clearly 'D) inflation'. The question talks about a rise in the price level, which is the definition of inflation. Simple stuff, really.
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Judy
2 months ago
I also think it's D) inflation, as the costs are expected to increase each year.
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Nathalie
2 months ago
I agree with Cletus, because the company will see an increase in income each year.
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Cletus
2 months ago
I think the answer is D) inflation.
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