Which of the Following Is Correct Concerning a Spin-Off

question 114

Multiple Choice

Which of the following is correct concerning a spin-off?

• A) A division of a firm is reconstituted as a new firm.
• B) An unprofitable division is divested.
• C) A division of a firm is bought by its managers.
• D) The spin-off generates no free cash flow.

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Definitions:

Nominal Rate

The stated interest rate of a financial product, not adjusted for inflation, which represents the rate before taking into account the compounding period.

Simple Interest

Interest calculated solely on the principal amount of a loan or deposit, over a particular time period.

Effective Annual Rates

The real return on an investment, taking into account the effect of compounding interest over multiple periods within a year.

Equal Installments

Periodic payments of the same amount over the term of a loan or investment.