U3 Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Project Bono Project Edge Project Clayton Capital investment $168,000 $183,750 $202,000 Annual net income:
Year 1 14,700 18,900 28,350 2 14,700 17,850 24,150 3 14,700 16,800 22,050 4 14,700 12,600 13,650 5 14,700 9,450 12,600 Total $73,500 $75,600 $100,800
Depreciation is computed by the straight-line method with no salvage value. The company’s cost of capital is 15%. (Assume that cash flows occur evenly throughout the year. )
1- Compute the cash payback period for each project: Bono, Edge, Clayto
2- Compute the net present value for each project.
3- Compute the annual rate of return for each project.
4- Rank the projects on each of the foregoing bases. Which project do you recommend?
Answers
Cash Payback Period:
The cash payback period is the time taken for the initial investment to be recovered through the cash inflows generated by the project. The cash inflows are calculated by subtracting the annual depreciation from the annual net income.
Project Bono:
Year 1: $14,700 - ($168,000/5) = $44,100
Year 2: $14,700 - ($168,000/5) = $44,100
Year 3: $14,700 - ($168,000/5) = $44,100
Year 4: $14,700 - ($168,000/5) = $44,100
Year 5: $14,700 - ($168,000/5) = $44,100
Total cash inflows: $44,100 x 5 = $220,500
Cash payback period = Initial investment / Annual cash inflow = $168,000 / $44,100 = 3.81 years
Project Edge:
Year 1: $18,900 - ($183,750/5) = $52,050
Year 2: $17,850 - ($183,750/5) = $48,150
Year 3: $16,800 - ($183,750/5) = $44,250
Year 4: $12,600 - ($183,750/5) = $28,050
Year 5: $9,450 - ($183,750/5) = $17,850
Total cash inflows: $52,050 + $48,150 + $44,250 + $28,050 + $17,850 = $190,350
Cash payback period = Initial investment / Annual cash inflow = $183,750 / $190,350 = 0.97 years
Project Clayton:
Year 1: $28,350 - ($202,000/5) = $67,700
Year 2: $24,150 - ($202,000/5) = $60,150
Year 3: $22,050 - ($202,000/5) = $52,600
Year 4: $13,650 - ($202,000/5) = $33,650
Year 5: $12,600 - ($202,000/5) = $31,600
Total cash inflows: $67,700 + $60,150 + $52,600 + $33,650 + $31,600 = $245,700
Cash payback period = Initial investment / Annual cash inflow = $202,000 / $245,700 = 0.82 years
Net Present Value:
The net present value (NPV) of a project is the present value of its expected cash inflows minus the present value of its initial investment. The present value of the cash flows is calculated using the company's cost of capital of 15%. A positive NPV indicates that the project is expected to generate a return higher than the company's cost of capital, while a negative NPV indicates that the project is expected to generate a return lower than the company's cost of capital.
Project Bono:
NPV = ($44,100 / 1.15) + ($44,100 / \(1.15^2\)) + ($44,100 / \(1.15^3\)) + ($44,100 / \(1.15^4\)) + ($44,100 / \(1.15^5\)) - $168,000 = $4,164.45
Project Edge:
NPV = ($52,050 / 1.15)
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Related Questions
when a merchandising business is compared to a service business, the financial statement that is not affected by that change is the statement of owner's equity. true false
Answers
The statement is False. When comparing the merchandise and Service business the changes are mainly affected by the Balance Sheet in the Financial Statements.
When a merchandising business is compared to a service business, the financial Statement that is not affected by that change is the statement of Stockholders/owner's equity. In a perpetual inventory System, the Merchandise inventory account is duly used to reflect the beginning inventory.
Merchandising is any activity that aids in the sale of a product to a consumer in a retail setting. Retail in-store merchandising is the practice of exhibiting objects that are for sale in a way that inspires customers to buy additional items or products.
Visual display merchandising in retail refers to the practice of selling goods by influencing consumer behavior through product selection, display, pricing, and packaging. Disciplines and discounts, the actual presentation of products and displays, and judgments regarding which products should be shown to which customers at what time are all included in this. In a retail situation, cleverly including complimentary items or accessories is frequently a wonderful method to persuade customers to buy more.
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What does the phrase "like animals escaped from their caves" imply about the sun's impact on the children? (Paragraph 60)
A
The sun makes the children violent.
B
The sun makes the children feel free.
C
The sun turns the children against each other.
D
The sun causes the children to understand Margot.
Answers
This question is about the phrase "Like animals escaped from their caves".
This phrase refers to the impact of sun on children. Children are innocent and they want to enjoy their life. They do not have worries of life.
They are free from stress. If weather is rainy or snowy it may hinder children from going out.
Children will have to stay inside their house due to bad weather conditions so they will loose their creativity.
The Phrase "Like animals escaped from their caves" means sun will compliment children to play and go outside.
The correct answer is B. The sun makes the children feel free.
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"Professional education and vocational training are the foundation
for the overall development of a nation". Justify this statement with
suitable examples.
?
Answers
Answer:
Professional education and vocational training are the foundation for the overall development of a nation because, by training people in the different careers and jobs that they will develop throughout their lives, this in turn is generating a series of people specialized in different labor fields that will benefit from one or the other it shapes society as a whole. Therefore, through this specific education in labor matters, future progress and well-being are generated for citizens.
A company completes construction of a $400 million offshore oil platform and places it into service on January 1. State law requires that the platform be dismantled and removed at the end of its useful life, which is estimated to be 10 years. The company estimates that the cost of dismantling the platform will be $20 million. The discounted value of the liability is $9 million using the company's credit-adjusted, risk-free rate. The company has already capitalized the $400 million construction cost of the platform. What amounts should the company record as liability and expense when the asset is placed into service
Answers
Answer:
b. Liability, $9,000,000; expense, $0.
Explanation:
An asset retirement obligation (ARO) refers to an obligation with respect to the acquisition , construction, development, etc. The liability should be recognized the liability at the present value that should be expected to be paid for settling the obligations
Here the $9,000,000 million represents the liability
Also the journal entry is
Asset Dr
To liability
(Being the asset placed is recorded)
There is no expense should be recorded in the income statement
Which of the taxes listed on her Form W-2 do you think Susan might be able to "get
back?"
Answers
The Federal and the state income tax are the axes listed on her Form W-2 she can get back
The taxes thst she can get backUpon the submission of their income tax return at the conclusion of a fiscal year, employees have the opportunity to receive a reimbursement if they contributed an excess amount towards their taxes throughout this financial period.
Such a circumstance may emerge when workers undergo excessive diminutions from their paychecks or meet particular criteria that grant them eligibility for tax credits or deductions.
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Use the following selected 2016 balance sheet and income statement information for Home Garden Supply Co. (in millions) to compute asset turnover (AT) to the nearest hundredth of a percent.
Net income Gross profit on sales Average total assets Sales Tax rate on operating profit
$69,960 $700,400 $360,600 $1,356,504 35%
Select one:
a. 5.16%
b. 9.99%
c. 51.63%
d. 33.56%
Answers
Answer:
3.76 times
Explanation:
The computation of the asset turnover is shown below:
Asset turnover = Net sales ÷ Average total assets
= $1,356,504 ÷ $360,600
= 3.76 times
By dividing the net sales from the average total assets, the asset turnover could arrive i.e 3.76 times
This is the answer but the same is not provided in the given options
data response
1 Yey Yo owns a chain of cafés selling cakes, biscuits and coffee. The company
wants to change its marketing strategy to increase its market share. Its
traditional cafés are in small towns and its target market is local people
who shop in these towns. The company does not advertise or use any sales
promotions. The prices are kept low because in these towns consumer incomes
are low. YeyYo wants to open modern cafés in city centres but the Marketing
Director thinks it will need to change its marketing strategy to appeal to the
higher income people in the city centres.
[2]
[2]
c Outline two reasons why YeyYo might need a new marketing strategy to
increase market share.
[4]
[6]
a Define 'marketing strategy.
b Identify two questions the Marketing Director will ask before deciding
on prices in the new cafés.
d Explain two reasons why it is important for YeyYo to have a clear
marketing objective.
e Recommend a marketing strategy for the new city centre cafés.
Justify your answer.
The com
its
[6]
oducts
Answers
YeyYo, a chain of cafés, wants to increase its market share by opening modern cafés in city centers.
What has to be doneThe Marketing Director recognizes the need for a new marketing strategy to appeal to the higher-income individuals in these areas.
Two reasons for the new strategy include targeting a new customer segment and adapting to the different competitive landscape.
The Marketing Director will consider the affordability level of the target market and the pricing strategies of competitors when deciding on prices for the new cafés.
It is important for YeyYo to have a clear marketing objective to guide its actions and measure success.
A recommended marketing strategy for the city center cafés includes brand positioning, product differentiation, pricing strategy, promotion and advertising, and focusing on customer experience. By implementing this strategy, YeyYo can effectively capture market share in city centers and attract the desired demographic.
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in the years preceding the 2008 financial crisis, borrowers did not always need to provide proof of employment or income on mortgage loan applications. we now refer to these as _______________ loans.
Answers
In the years preceding the 2008 financial crisis, borrowers did not always need to provide proof of employment or income on mortgage loan applications. We now refer to these as "stated income" or "no-doc" loans.
During the housing bubble leading up to the 2008 financial crisis, lenders relaxed their underwriting standards, and some mortgage loans were issued without requiring borrowers to provide proper documentation of their income or employment.
These loans were commonly referred to as "stated income" or "no-doc" loans. Borrowers could simply state their income on the loan application without providing any supporting documentation. This lax lending practice contributed to the subprime mortgage crisis and the subsequent financial meltdown in 2008.
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The three primary reactions people have to attempts to manage or influence them are
Answers
Answer:
Resistance, Compliance, or Commitment.
Explanation:
HOPE THIS HELPS!!! ;P
singh company reports a contribution margin of $708,000 and fixed costs of $472,000. (1) compute its income. (2) compute its degree of operating leverage. (3) if sales increase by 20%, what amount of income is expected?
Answers
Operating leverage is a calculation that determines how much a corporate entity's profit may be enhanced by raising its revenue.
Particular
With a new contribution margin of 115% of $960,000, you get $1,104,000
Less: Fixed expense (720,000)
$384,000 in income before taxes
The contribution margin will rise by 15% with an increase in sales.
Operating Leverage: What Is It?
Operating leverage is an accounting metric that aids the analyst in examining the relationship between a company's operations and revenues; the ratio provides information about how much operating profit will increase with a given percentage of sales increase, which emphasizes the predictability of sales.
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To calculate the number of montly payments required to pay off a loan or meet an investment goal, use the _______ function.
Answers
To calculate the number of monthly payments required to pay off a loan or meet an investment goal, use the nper function.
In finance, lending is the lending of money by one or more individuals, organizations, or other entities to other individuals and organizations, etc. The beneficiary incurs a debt and usually has to pay interest on that debt until that debt is also repaid. to repay the principal borrowed.
The promissory note will typically state, among other things, the principal amount of the loan, the interest rate charged by the lender, and the date of repayment. A loan involves reallocation of assets in question over a period of time, between the lender and the borrower.
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You cause an accident and injure the other driver. The case goes to trial and there is a verdict to compensate the injured person with $58,000. You have a $75,000 coverage limit per person for bodily injury. How much will the insurance company pay?.
Answers
The insurance company will pay $58,000.
Since you have a coverage of $75000 so the insurance company could cover $58000 out of it to compensate the injured person.
Insurance coverage- Insurance coverage is the amount of risk or liability that is covered by insurance services for an individual or entity. An insurer provides insurance coverage, such as auto insurance, life insurance, or more exotic forms, such as hole-in-one insurance, in the event of unforeseen events.
Most financial experts recommend four types of insurance: life, health, auto, and long-term disability.
The amount of risk, liability, or potential loss that insurance protects is referred to as insurance coverage. It assists individuals in recovering from financial losses caused by incidents such as car accidents, property damage, or unexpected health issues.
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100 points if you have the correct answer ^^
Assignment Introduction
Assume that you are involved in a job search. You are ready to construct an outstanding résumé to put before employers. You have carefully reviewed and documented your list of abilities, hard and soft skills, education, credentials, and past work experience (including volunteering). You have also considered your personality traits and job preferences. However, you have not narrowed your search to just one type of consumer services job, and you have seen several that interest you.
Assignment Directions
Using any or multiple sources (newspaper, trade or association publication, online job board, networking site, etc.), select two job listings. They must have very different job descriptions in different fields. For example, bookkeeping in a hospital and a customer service position in a retail setting. Using your own actual information, construct a general purpose résumé suitable for handing out in person. You may choose any format that is appropriate to your situation. Using the same information, build two more résumés, one each targeting the two different job descriptions and formatted to submit digitally/online.
Assignment Guidelines
Your submission must do the following:
Total three sheets; one typed page each for your basic and two targeted résumés
Include copies of your two chosen job descriptions as an attachment.
Each résumé must contain the following:
Your contact information
Educational background
Employment history, most recent to oldest (minimum 3 entries; if you do not have 3, you may make one up, as long as it is plausible and appropriate).
Accomplishments (two or three entries)
Special skills, including foreign languages spoken, as applicable
Submission Requirements
Proofread for spelling, grammar, and punctuation
Use complete sentence structure and standard written English; do not use texting abbreviations or other shortcuts
Source all references in a proper format
Answers
Your submission should include three sheets; one typed page each for your basic and two targeted résumés. The basic résumé should contain your contact information, educational background, employment history, accomplishments, and special skills.
What is education?Education is the process of acquiring knowledge, skills, values, beliefs, and habits. It is an important part of our life and it helps us to develop as individuals and to become better citizens. Education is an essential part of our society and it provides us with the necessary tools to grow and succeed.
The two targeted résumés should be tailored to the two job descriptions you have chosen, and should include the same information as the basic résumé. You should also include copies of your two chosen job descriptions as an attachment.
When writing your résumés, you should proofread for spelling, grammar, and punctuation, use complete sentence structure and standard written English, and source all references in a proper format.
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What is structurally different between starch and cellulose that gives them different physical properties?.
Answers
Cellulose has rigid α−1,4 glycosidic linkages while starch has less inflexible β−1, four glycosidic linkages. c. Cellulose has amylose and amylopectin, making it greater inflexible than starch.
Cellulose is a natural compound with the formulation ₙ, a polysaccharide inclusive of a linear chain of numerous hundred to many lots of β-related D-glucose gadgets. Cellulose is a vital structural factor of the primary cell wall of inexperienced flowers, many styles of algae, and the oomycetes.
Cellulose is a fiber observed in fruits, vegetables, and other plant ingredients as a part of a plant's mobile walls. it is discovered in tree bark and a plant's leaves. while you devour plant foods, you're eating cellulose.
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Khabib transferred $100,000 to an irrevocable trust for the benefit of his minor child, Rickson. The transfer was eligible for the annual exclusion. The trust permits the trustee to accumulate trust income within the trust, and only make distributions to Rickson based upon an ascertainable standard until Rickson is 21 years old. When Rickson attains the age of 21, the trust must terminate and the trust assets must be distributed to Rickson. Which type of trust has Khabib created
Answers
Answer:
are you well the son and me
Explanation:
hat
Help this is super confusing
Answers
Answer: Reasons
Explanation: Crystals are collected for jewelry, sugar, salt, computer chips. So if it shows you all those examples it would be collected for many reasons. I hope this helped!
You're given a monthly budget of $400 for social media advertising. You want to set a daily budget for February to insure you don't overspend for the month. What is your daily budget? (It is not a leap year.)
Answers
Answer:
$14.28
Explanation:
you will have a couple of cents left over at the end because you cant evenly divide 400 by 28
Please Help:) If possible:)
Answers
Answer:
C,D
Explanation:
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true or false: the firm's senior executives need to understand the financial implications of the it initiative so they can decide whether to allocate resources to it. true false question. true false
Answers
Senior executives of a company must be aware of the financial effects of their projects before deciding whether to dedicate resources to them. This assertion is true.
The future wealth of people should be anticipated to rise. Managing the company's finances is part of finance. The financial manager is responsible for determining how much money is needed and when, how to spend the cash most effectively, and how to secure the necessary finance. Financial planning, investment, and financing are the duties of the financial manager.
Senior executives are often in charge of overseeing certain divisions or departments within their organization and making sure that they are in line with corporate growth strategy. They could also be in charge of directing the work of department heads who supervise smaller teams of workers.
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Managers are responsible for helping ___ to understand and follow their company's code of ethics
Answers
Answer:
Managers are responsible for helping employees to understand and follow their company's code of ethics
Managers are responsible for helping employees to understand and follow their company's code of ethics.
What are a code of ethics and its importance?It offers a common set of guidelines or expectations that everyone in the field must follow. It describes the industry's best practices. It serves as a foundation for achieving compliance with the profession's regulations. It gives the profession a legal standard.
The code of ethics outlines the company's values, standards, and expectations for ethical behavior. It is the manager's role to ensure that employees are aware of these values and understand how they relate to their job duties and responsibilities.
Managers are responsible for creating a culture of ethics within their teams and the organization as a whole. This means that they must lead by example and demonstrate ethical behavior themselves, while also holding their employees accountable for their actions.
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3. When filling out a W-4 form, in what situation would a teen want to claim exemption from federal taxes being withheld from their paycheck? O They don't feel like paying taxes. O They make more than the minimum income threshold. O They don't make more than the minimum income threshold.
Answers
Answer:
They don't make more than the minimum income threshold
Explanation:
^
When filling out a w-4 form, if a teen do not make more than the minimum income threshold can claim exemption from federal income taxes being withheld from their paycheck.
What are taxes?Taxes are frequently defined as mandatory levies levied on the people for the benefit of the state. Every penny of taxpayer money will be included in the post of state income from the tax sector. Its purpose is to fund central and native government spending for community welfare.
If an employee is eligible, he or she can also use Form W-4, which instructs the government not to deduct any federal income tax from his or her wages. To be eligible for this exemption, the employee must have had no tax liability the previous year and expect to have no tax liability this year.
Therefore, a teen should not make more than the minimum income threshold to claim the exemption from federal taxes being withheld from their paycheck.
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Make a list of skills that you presently possess that will assist you in getting a job. I put 50 pts
Answers
A list of skills you have that will assist you in getting a a job could be:
Professional qualificationsCommunicationEthicCreativityCritical thinkingWhat skills do you need to get a job?It is necessary for the candidate to have characteristics aligned with the job market, which today is competitive and values candidates with vision and good relationships with other individuals, as there is more and more integration in the world due to globalization.
Therefore, candidates must prepare themselves for the job market through professional and educational qualifications, being an ethical, creative and communicative individual.
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suggest any 5 methods by which the condition of technical education can be improved
Answers
Answer:
Acknowledge and address overcrowding.
Make funding schools a priority.
Address the school-to-prison pipeline.
Raise standards for teachers.
Put classroom-running and curriculum-building decisions in the hands of the community.
Explanation:
Technology can be utilized to improve teaching and learning and help our students be successful. ... Through the use of learning management systems (LMS) students can access online resources to get assistance on demand beyond the physical reach of their teacher. Technology can also extend education in another way.
assisted projects aimed at improving technical and vocational education. Introduction ... priorities as defined by aid recipients (see, for example, Gray &.
Technical education is a term applied to schools, institutions, and educational programs that specialize in the skilled trades, applied sciences, modern technologies.
When Amazon introduced the latest Kindle Fire tablet at $49. 99 and the average price of competitive models was $323, Amazon was using a ________ pricing strategy
Answers
When Amazon introduced the latest Kindle Fire tablet at $49.99, which was significantly lower than the average price of competitive models at $323, Amazon was using a penetration pricing strategy. This is a common strategy used by companies when they want to enter a new market or increase their market share quickly. The objective of penetration pricing is to offer a product at a lower price point to attract new customers and gain a foothold in the market. By pricing the Kindle Fire tablet so low, Amazon was able to target a wider customer base who might have been hesitant to purchase a tablet due to its high price point. Once Amazon had established itself in the market, it could then gradually increase the price of its products to align with competitors or differentiate itself with new features. Overall, the penetration pricing strategy is a smart move for Amazon as it helps the company gain market share and brand loyalty in a highly competitive industry.
Amazon's pricing strategy when introducing the latest Kindle Fire tablet at $49.99, while the average price of competitive models was $323, is known as a penetration pricing strategy. This approach involves setting a low initial price for a new product to quickly gain market share and attract customers. By offering a significantly lower price than competitors, Amazon aimed to entice customers to try their product and potentially establish a loyal customer base.
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Discuss with the class:
The difference between power and authority
The importance of the types of power to the supervisor
The impact of coaching and teaching to the employee
Answers
The main difference between power and authority lies in their sources and nature. Power refers to the ability to influence or control others while authority is the legitimate and recognized right to exercise power.
What distinguishes power from authority in their essence?Power can be obtained through various means such as physical strength, wealth, or influential connections. It can be wielded by individuals, groups, or organizations to impose their will on others.
Authority, on the other hand, is derived from a formal position or role within a social or organizational structure. It is granted based on established rules, laws, or social norms, and is recognized as a legitimate source of influence.
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A basic concept in economics is that all resources are
O scarce.
• allocated.
valuable.
O renewable.
Answers
A basic concept in economics is that all resources are scarce. Thus, option a. is the correct answer.
Explain about the basic concept about the economics.
Every person's life includes doing economics on a regular basis in addition to studying it. It serves as a means of balancing the inputs and outputs of money. Whatever it is, one should prepare before the month or count at the end of the month or year, whether it is a small family, a large family, a small commercial enterprise, or a giant organisation. Economics seeks to strike a balance between the unending demands and the finite resources.
After saying this, we'll start talking about the topic of "economics." The pupils who are just beginning their studies in commerce in class XI will find this subject extremely interesting. In essence
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Answer:
Option A scarce
Explanation:
Why would the government give tax breaks to companies that make a lot of money?
Answers
Answer:
The government uses tax incentives in order to help increase economic development. Tax incentives make it less expensive and more profitable for a business to function. States can use tax incentives to encourage businesses to operate in their state, according to the University of Central Arkansas
Explanation:
use an optimization model to determine the best course of action for your real estate company, using the following assumptions: you wish to maximize the net present value of profit over the next eight quarters. assume 6% irr, compounding quarterly. (so 1.5% per quarter) in each neighborhood in which they open an office, they will achieve a baseline of 5.5% market penetration, and earn a 5% commission on sales. for every .1% the commission you charge decreases, your market penetration will increase by .15%, (down to a minimum penetration of 4% or a maximum of 6%) you must pay rent and utilities in each office you open each month. determine the average cost per gross square foot of commercial real estate in your neighborhood for the last year (in nyc historical). [when determining this value, you should exclude properties where gross square feet or sale price is unknown.] each month you will pay 1.5% of this for rent and utilities for each square foot of office space you rent. you must rent at least 250 square feet of office space, plus 125 for each employee you hire. you may hire up to 3 employees. each employee you hire costs a yearly salary $65,000 including benefits, and increases your market penetration by .5%. your monthly operating budget is $15,000. you may add other assumption you deem realistic so long you provide the explanation in your report.
Answers
The best course of action for the real estate company is to open offices in neighborhoods with higher market penetration and lower commercial real estate costs, hire up to 3 employees, and set commission rates to achieve maximum net present value of profit over the next 8 quarters while staying within the monthly operating budget of $15,000.
To optimize net present value of profit, the real estate company should analyze market penetration, commission rates, and real estate costs in each neighborhood to determine which locations will yield the highest profit.
The company should also hire up to 3 employees to increase market penetration while staying within the operating budget. The commission rate should be set to maximize profit while also taking into account the relationship between commission rates and market penetration.
The company should aim to rent office space in neighborhoods with low commercial real estate costs and high market penetration, and adjust the office space size to meet the minimum requirements while minimizing costs.
Finally, the company should regularly monitor and adjust its strategy to adapt to changing market conditions.
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Gold has historically functioned as money. This is due, in part, to the willingness of others to accept it as valid payment for goods and
services. In this case, gold is functioning as an) (1 point)
Answers
The willingness of others to accept gold as a valid payment for goods and services made gold a medium of exchange. In other words, gold was used to facilitate commercial exchanges when these became more developed.
Money has changed and developed over time, it has always been used to make business practices more simplified and standardized.
Some examples of the use of a medium of exchange were salt, which was a rare mineral that was offered in trade, hence the word salary.
Therefore, gold began to be used as a means of exchange from the need to use coins with greater durability.
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An insured purchased a noncancellable health insurance policy 1 year ago. Which of the following circumstances would NOT be a reason for the insurance company to cancel the policy?The insured is in an accident and incurs a large claimThe insured does not pay the premium.The insured reaches the maximum age limit specified in the policy.Within two years of the application, the insurer discovers a misrepresentation.
Answers
The insured purchased a noncancellable health insurance policy one year ago. The circumstance that would NOT be a reason for the insurance company to cancel the policy is when the insured reaches the maximum age limit specified in the policy.
What is a noncancellable insurance policy?
A noncancellable insurance policy is a policy that cannot be canceled or changed by the insurance company as long as the policyholder maintains the policy and pays the premiums. Because the insurer assumes the financial risk for the life of the policy, a noncancellable policy is generally more expensive than a cancellable policy. Misrepresentations, non-payment of premiums, and policyholder's age limits can all be reasons for the insurer to cancel a policy.
However, with a noncancellable insurance policy, the policyholder has greater protection against cancellation of the policy than with other types of policies. As a result, a noncancellable policy is more expensive than a cancellable policy.
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