Scenario 13-4 Suppose That Abdul Opens a Coffee Shop. He Receives a Receives

question 195

Multiple Choice

Scenario 13-4
Suppose that Abdul opens a coffee shop. He receives a loan from a bank for $100,000. He withdraws $50,000 from his personal savings account. The interest rate on the loan is 8%, and the interest rate on his savings account is 2%.
-Refer to Scenario 13-4. Abdul's explicit cost of capital is

• A) $8,000.
• B) $4,000.
• C) $2,000.
• D) $1,000.

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Definitions:

Accrued Expenses

Expenses that have been incurred but not yet paid or recorded, recognizing costs as they are earned rather than when they are paid.

Spreadsheet Method

The spreadsheet method involves using software like Microsoft Excel to organize, calculate, and analyze data, often used for financial analysis and planning.

Retained Earnings

The stockholders’ equity created from business operations through revenue and expense transactions; an account representing the net income retained in a corporation.

Noncash Accounts

Accounts in financial accounting that represent transactions not involving physical cash, such as depreciation or credits.