Firm a and Firm B Are Identical Except That a Is

question 6

Multiple Choice

Firm A and Firm B are identical except that A is incorporated while B is an unlimited liability partnership. Both have assets worth $500,000 ($500K) funded with a debt ratio of 40 percent. Suppose that the assets suddenly become worthless, what is the maximum possible loss to the equityholders of each company?

• A)Firm A: $300K; Firm B: $500K
• B)Firm A: $200K; Firm B: $300K
• C)Firm A: $500K; Firm B: $200K
• D)Firm A: $500K; Firm B: $500K

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Definitions:

Archegonia

The female reproductive structure found in ferns, mosses, and some conifers, where fertilization of an egg occurs.

Fiddleheads

The furled fronds of a young fern, harvested for use as a vegetable.

Vascular Tissue

Plant tissues that are involved in the transportation of water, nutrients, and sugars throughout the plant, comprising xylem and phloem.

Pteridophytes

Non-flowering plants that reproduce and disperse via spores, including ferns, horsetails, and clubmosses, distinct from seed plants in their lifecycle.