Which of the Following Is True Regarding the Preexisting Duty

question 8

Multiple Choice

Which of the following is true regarding the preexisting duty rule?

• A) Unforeseen circumstances is an exception, but additional work and past consideration are not exceptions.
• B) Additional work is an exception, but unforeseen circumstances and past consideration are not exceptions.
• C) Past consideration is an exception, but unforeseen circumstances and additional work are not exceptions.
• D) Unforeseen circumstances and additional work are exceptions, but past consideration is not an exception.
• E) Unforeseen circumstances and past consideration are exceptions, but additional work is not an exception.

Differentiate between business risk and financial risk and their determinants.

Comprehend the concept of financial leverage and its impact on a firm’s earnings per share (EPS) and earnings before interest and taxes (EBIT).

Understand the role and implications of corporate and personal taxes in capital structure decisions according to the MM and Miller models.

Recognize the assumptions and limitations of theoretical models such as the MM and Miller models, especially concerning taxes and bankruptcy costs.

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Definitions:

First-in First-out

An inventory valuation method where the costs of the oldest inventory items are charged to cost of goods sold first.

Average Cost

A method of calculating the cost of inventory or assets by taking the weighted average of the costs of all similar items in inventory or all assets acquired during a period.

Specific Identification

A method of inventory costing that tracks the cost of individual items or batches of items.

Hardware Store

A retail store specializing in the sale of tools, building materials, and home improvement products.