Twenty Years After You Take This Class You Are Successful

question 109

Multiple Choice

Twenty years after you take this class you are successful and wealthy. Knowing that this class was the key to your success, you look up your old professor and send a letter saying, "Because you helped me so much, I am going to send you a check for $100,000." Later you come to your senses and do not send the check. Your old professor sues you for the money:

• A) you have to pay; there is a valid contract
• B) you do not have to pay; the professor did not send a timely letter of acceptance
• C) you do not have to pay; you were legally insane
• D) you do not have to pay; promissory estoppel applies
• E) none of the other choices

---

Definitions:

Market Yield

The current rate of return anticipated on a bond if held until maturity, expressed as an annual percentage.

Component Cost

The cost related to each source of capital, such as debt and equity, that a company uses for funding.

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, usually with fixed dividends.

Cost of Retained Earnings

The opportunity cost for shareholders for having the company retain the earnings instead of distributing them, often considered in investment and dividend decisions.