Exhibit 14.5 The Following Questions Are Based on the Information Below

question 3

Multiple Choice

Exhibit 14.5
The following questions are based on the information below.
An investor is considering 4 investments, A, B, C, D. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following decision tree has been developed for the problem. The investor has estimated the probability of a declining economy at 40% and an expanding economy at 60%.
-An alternative

• A) is a course of action intended to solve a problem
• B) is always feasible
• C) is never feasible
• D) is realistic

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Definitions:

Statutory Solutions

Statutory solutions involve solving legal, social, or economic issues through the enactment of laws or statutes by a governmental body.

Close Corporations

A designation for corporations with a limited number of shareholders and operations that are more informally managed, often without a board of directors.

MBCA

stands for the Model Business Corporation Act, a model set of laws prepared to assist states in drafting their own corporation statutes.

Preincorporation Services

Services performed or actions taken in the name of a corporation prior to its legal formation.