Which One of These Should Be the Primary Appeal of Unused

question 4

Multiple Choice

Which one of these should be the primary appeal of unused debt capacity to a bidder firm?

• A)Ability to borrow additional funds to increase management bonuses
• B)Source of funding for negative net present value projects
• C)Increased funding for the payment of unsustainable dividends
• D)Tax savings resulting from increased interest expense on additional debt
• E)Debt funding for a golden parachute

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Definitions:

Variable Costing

An accounting technique that incorporates just the variable costs of production (such as direct materials, direct labor, and variable manufacturing overhead) into the costs of products.

Fixed Overhead

Regular, static expenses that do not change with the level of production or sales, including rent, salaries, and insurance.

Net Income

The profit of a company after all expenses and taxes have been deducted from revenue.

Inventory

The goods and materials that a business holds for the ultimate goal of resale or processing.