A Borrower Finds That the Incremental Cost of Borrowing an Extra

question 2

True/False

A borrower finds that the incremental cost of borrowing an extra $10,000 is 14%.The borrower can earn 12% on alternative investments of comparable risk so he would be better off by not borrowing the extra 14%.

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Definitions:

State Incorporation Statutes

Laws governing the process by which companies are recognized as legal entities under the state's jurisdiction.

Shareholders

Individuals or entities that own shares in a corporation, giving them partial ownership and possibly the right to vote on corporate matters.

Personally Liable

The state of being legally responsible for something on a personal level, as opposed to through a corporate or collective entity.

Defective Corporation

A corporation whose incorporation process included an error or omission.