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Mariana Needs $20,000 to Start Up Her Own Business and Get

question 71

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Mariana needs $20,000 to start up her own business and get it off the ground. She can either withdraw the money from her savings account, where she currently earns 1.5 percent interest, or she can take out a loan for $20,000 and pay 4 percent interest. Which of the following statements is true?The implicit cost of taking out a loan is $300.The explicit cost of taking out a loan is $800.The implicit cost of withdrawing money from her savings account is $300.


Definitions:

Current Liability

A company's debt or obligations that are due within one year.

Cumulative Preferred Stock

A type of preferred stock that accrues dividends if they are not paid in the year they are due, prioritizing these payment backlogs for future distribution.

Par Value

A nominal value assigned to shares of stock by the issuing company, which is the minimum price at which shares can be issued, often used for legal capital purposes.

Annual Dividend

The total dividend payment a company distributes to its shareholders in a fiscal year.

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