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Aiyah, Inc

question 168

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Aiyah, Inc. recently has had financial difficulty and is being liquidated by the Federal Bankruptcy Court. The firm has a liquidation value of $1,000,000-$400,000 from the fixed assets that served as collateral for the mortgage bonds and $600,000 from all other assets (all prior claims have been satisfied) . The firm's current capital structure is as follows: Aiyah, Inc. recently has had financial difficulty and is being liquidated by the Federal Bankruptcy Court. The firm has a liquidation value of $1,000,000-$400,000 from the fixed assets that served as collateral for the mortgage bonds and $600,000 from all other assets (all prior claims have been satisfied) . The firm's current capital structure is as follows:   The common stockholders will receive ________ in the liquidation. A)  $500,000 B)  $333,333 C)  $198,000 D)  $0 The common stockholders will receive ________ in the liquidation.


Definitions:

Marginal Costs

The additional cost incurred from producing one additional unit of a product or service.

Break-even Quantity

The number of units that need to be sold for a business to cover its production costs, resulting in zero profit or loss.

Fixed Costs

Costs that do not change with the level of output or sales, such as rent or salaries, remaining constant regardless of business activity.

Marginal Costs

The cost added by producing one additional unit of a product or service.

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