When a Firm Buys Another Company, the Company Frequently Has

question 187

Multiple Choice

When a firm buys another company, the company frequently has some outstanding debt that the purchaser must pay. Consider three companies, A, B, and C, that are purchased by Maxx Industries. The following table gives the amount of each company's debt, classified by the number of days remaining until the debt must be paid. What payment plan did Maxx Industries use if the outstanding debt is given by the following matrix?

• A) ​They paid 30% of the debts due in 30 days, 100% of the debts due in 60 days, and 100% of the debts due in more than 60 days.
• B) ​They paid 30% of the debts due in 30 days, 30% of the debts due in 60 days, and 100% of the debts due in more than 60 days.
• C) ​They paid 100% of the debts due in 30 days, 100% of the debts due in 60 days, and 30% of the debts due in more than 60 days.
• D) They paid 100% of the debts due in 30 days, 30% of the debts due in 60 days, and 100% of the debts due in more than 60 days.
• E) They paid 100% of the debts due in 30 days, 30% of the debts due in 60 days, and 30% of the debts due in more than 60 days.

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Definitions:

Marginal Cost

The cost added by producing one additional unit of a product or service, crucial for making efficient production and pricing decisions.

Marginal Revenue

The supplementary earnings obtained through the sale of an additional product or service unit.

Marginal Cost

The increase in total cost that arises from producing one additional unit of a product or service.

Average Total Cost

The cost per unit of output, determined by dividing the overall production cost by the number of units produced.