In Accordance with the Rules That Apply to Corporate Formation

question 6

Multiple Choice

In accordance with the rules that apply to corporate formation, which one of the following features does not make an issue of preferred stock "nonqualified"?

• A)The shareholder can require the corporation to redeem the stock.
• B)The dividend rate on the stock may not vary with interest rates, commodity prices, or other similar indices.
• C)The corporation is either required to redeem the stock or is likely to exercise a right to redeem the stock.
• D)The stock is limited and preferred as to dividends.

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Definitions:

AVC

Average Variable Cost refers to the cost of variable inputs divided by the quantity of output produced.

ATC

Average Total Cost; the total cost divided by the quantity produced, representing the cost per unit of output.

AFC

Stands for Average Fixed Cost, which is the fixed costs of production divided by the quantity of output produced.

MC Curve

Marginal cost curve represents how the cost of producing one more unit of a good changes as production scales.