Which One of the Following Is Least Likely to Explain

question 48

Multiple Choice

Which one of the following is least likely to explain why entrepreneurs contribute their personal funds to start-up projects? Their contribution:

• A) acts as a signal to venture capitalists.
• B) repays debt held by the venture capitalist.
• C) retains a portion of the firm's equity.
• D) provides incentive to expend effort.

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Definitions:

Cash Flow Stream

A cash flow stream is a series of cash flows associated with an investment over a period of time.

Interest Rate

The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.

Future Value

The value of an asset at a specific date in the future, calculated from its present value using the expected rate of return.

Compounded Semiannually

Interest calculation method where interest is added to the principal amount twice a year, leading to interest on interest in the second half.