Fred Is a Partner in a Land Development Partnership

question 2

Multiple Choice

Fred is a partner in a land development partnership. He has learned independently of an opportunity to pursue a land development project with Nelly. Nelly refuses to be involved in business with Fred if he associates his partnership in the project. Nellie will do business with Fred only if he is independent of his partners. Fred will have no liability to his partners if:

• A) he is careful to inform any third parties with whom he and Nellie do business that he is not acting on behalf of the partnership
• B) no damages are suffered by the partnership
• C) he keeps the opportunity secret
• D) he ensures that anything he does on the project is outside office hours
• E) none of the above will protect Fred from liability

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Definitions:

Cost of Capital

The required return necessary to make a capital budgeting project, such as building a new factory, worthwhile.

Net Investment

The total amount spent on purchasing new capital assets minus depreciation on existing assets, indicating the actual increase in a company's capital stock.

Cash Operating Costs

Expenses directly related to the daily operational activities of a business, excluding financing costs and taxes.

Depreciated

An accounting process of allocating the cost of a tangible asset over its useful life, reflecting its decrease in value over time.