On May 1,1985,Mint,a 16-Year-Old,purchased a Sailboat from Sly Boats

question 85

Multiple Choice

On May 1,1985,Mint,a 16-year-old,purchased a sailboat from Sly Boats.Mint used the boat for six months,at which time he advertised it for sale.Which of the following statements is correct?

• A)The sale of the boat to Mint was void,thereby requiring Mint to return the boat and Sly to return the money received.
• B)Sly Boats has the power to recover the boat from Mint because he has advertised it for sale.
• C)Mint's use of the boat for six months after the sale on May 1 constituted a ratification of that contract.
• D)Mint may disaffirm the May 1 contract at any time prior to or within a reasonable time after reaching majority.

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Definitions:

Discount Rate

The rate of interest utilized to calculate the current value of future cash flows within discounted cash flow analysis.

Cost of Capital

A company's expense for acquiring funds and capital, calculated as a weighted average of debt and equity costs.

Debt-Equity Ratio

A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity; it indicates what proportion of equity and debt the company is using to finance its assets.

Levered Firm

A company that has debt in its capital structure, showing that it finances some of its operations through borrowing.