A Agrees to Buy 1000 Shares in a Telephone Company

question 93

Multiple Choice

A agrees to buy 1000 shares in a telephone company from B for $3.00 a share.A believes that the value of the shares in the company is going to go up to $15.00 in a day or two.However,B believes that the value of the shares is going to go down to $1.50 and wants to get as much money as he can.Unknown to either A or B,at the time of the agreement,the value of the company and thus the shares has dropped below $1.50,to $0.75.A now wishes to get out of the agreement.In this case,

• A)A will succeed because A was mistaken about the value of the shares in the company and has been adversely affected.
• B)A will succeed because there was a mistake as to the subject matter of the contract and A has been adversely affected.
• C)A will not succeed because A was adversely affected and took a risk about the company and the value of its shares.
• D)A will succeed because a change in circumstances of the company does not affect the agreement.
• E)A will not succeed because both A and B took a risk about the value of the shares in the company.

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Definitions:

Managerial Information

Pertains to the tailored data and reports designed to assist managers in making specific decisions to achieve organizational objectives.

Long-Term Planning

The process of setting goals and outlining strategies over an extended period, typically over years or decades, to achieve sustained growth.

Conversion Costs

Costs associated with converting raw materials into finished goods, including both direct labor and manufacturing overhead.

Direct Labor Cost

The wages or salaries paid to workers directly involved in the production of goods or services.