Darrell Inherited a Large Amount of Money from His Uncle

question 141

Multiple Choice

Darrell inherited a large amount of money from his uncle.Darrell wishes to start his own business, and his lawyers encourage him to make it a corporation.What disadvantage of a sole proprietorship are the lawyers trying to avoid?

• A) unlimited liability
• B) lack of management skills
• C) retention of all profits
• D) lack of money
• E) double taxation

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Definitions:

Variable Cost

Expenses incurred by a business that vary directly with the level of production or sales volume, such as cost of goods sold.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time, used to assess the profitability of investments.

Discount Rate

An interest rate used by central banks to lend money to commercial banks, intended to influence the broader economy.

Initial Investment

The initial amount of money or capital put into an investment project or venture.