Ray Patel, a Local DJ, Bought Sound Equipment from Backstage

question 52

Multiple Choice

Ray Patel, a local DJ, bought sound equipment from Backstage Equipment Inc. and paid by three post-dated cheques of $10,000 each. Backstage took out a loan for $30,000 and endorsed the cheques to its bank as security for the loan. The equipment totally failed and Patel wants to stop payment against the bank. Will he be successful?

• A)Yes, because the equipment did not work.
• B)Yes, if he put a stop payment before the due dates on the cheques
• C)No, because the bank is a holder in due course.
• D)No, because the bank actually lent $30,000 to Backstage.
• E)No, because the bank has a loan agreement with Backstage.

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Definitions:

Cash Flows

The overall volume of cash inflows and outflows within a firm, influencing its liquid assets.

Present Value

The value at present of money or cash flows expected in the future, discounted at a particular rate of return.

Interest Rate

The cost of borrowing money or the return on invested funds, typically expressed as a percentage.

Present Value

The immediate worth of a future lump sum or successive cash inflows, considering a specific return rate.