If a Firm Buys a Delivery Van for $18,000 and Can

question 9

Multiple Choice

If a firm buys a delivery van for $18,000 and can resell it in 2 years for $7,500, the sunk cost is

• A)$10,500.
• B)$7,500.
• C)$18,000.
• D)$0.

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Definitions:

Preemptive Rights

The rights that allow existing shareholders to purchase new shares in a company before the company offers them to the public, to maintain their proportionate ownership.

Standby Underwriting

An arrangement in which an underwriter agrees to buy any unsold shares after a public offering, ensuring the issuer sells all shares but only if necessary.

Common Shares

Type of equity security that represents ownership in a corporation, providing voting rights and entitling the holder to a share of the company’s success through dividends and/or capital appreciation.

Federal Statutes

Laws enacted by the United States Congress that apply nationally.