What Is the Absolute Priority Rule of the Following Claims

question 3

Multiple Choice

What is the absolute priority rule of the following claims once a corporation is determined to be bankrupt?

• A)administrative expenses, wages claims, government tax claims, debtholder and then equityholder claims
• B)administrative expenses, wages claims, government tax claims, equityholder and then debtholder claims
• C)wage claims, administrative expenses, debtholder claims, government tax claims and equityholder claims
• D)wage claims, administrative expenses, debtholder claims, equityholder claims and government tax claims
• E)None of the above

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Definitions:

Discounted Payback

The period of time it takes for an investment to generate cash flows to recover its initial cost, adjusted for the time value of money.

WACC

Calculating the Weighted Average Cost of Capital involves determining a business's capital costs by giving proportional weights to different capital sources.

Cash Flows

The sum of funds flowing in and out of a company, particularly influencing its liquid assets.

IRR

Internal Rate of Return, the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.