Answer: a. the price of the bond will fall.
Explanation:
If one buys a 7% coupon, 20-year bond today when it’s first issued and the interest rates suddenly rise to 15%, the value of the bond will decrease.
This is because there's an inverse relationship between price and interest rates, that is, the increase in one variable will lead to the decrease in the other variable. When there is a rise in the inters rate, it should be noted that the payments on fixed coupon are worth less.
Therefore, the price of the bond will fall.
Arturo and Dina are married with two dependents. They enrolled in a qualified plan through the Marketplace at a cost of $2,700 per year. Their household income was $31,000. Their SLCSP premium is $3,600. What is their premium tax credit?
Answer:
$2,261
Explanation:
I calculated this tax credit using 2019 information:
household income = $31,000
household income as a % of poverty line = $31,000 / $25,100 = 123.5%
applicable percentage = 4.32%
required contribution = $31,000 x 4.32% = $1,339.20 ≈ $1,339
SLCSP = $3,600
SLCSP - required contribution = $3,600 - $1,339 = $2,261
$2,261 ≤ $2,700 (cost of qualified plan)
we must choose the lower between $2,261 and $2,700 ⇒ $2,261
Suppose that the dollar-mark 6 months forward rate is $1.275/Mark. Suppose that the dollar-mark forward premium is 5%. Calculate the spot rate, $1=Mark_______ work to 4 decimal places.
Answer:
$1 = 0.8039 Mark
Explanation:
Forward Rate = Spot rate * (1 +rate*180/360)
1.275 = Spot rate * (1 + 0.05*180/360)
Spot rate = $1.2439/Mark
Now we are asked rate per dollar
$1 = (1/1.2439)Mark
$1 = 0.8039 Mark
Recruitment is an effort by an organization to keep employees and is the opposite of turnover.
a. True
b. False
Answer:
True
Explanation:
A fixed budget performance report not only compares results, but also indicates if the variances are:_______.
Answer:
favorable or unfavorable
Explanation:
The fixed budget performance report is a report that analyzes and compared the actual number with the expected number in terms of performance. It not only compared the results generated from the actual and standard one but also represent whether the variance is favorable or unfavorable
hence, the answer is favorable or unfavorable
About how frequently does Hope receive a paycheck?
Answer:
every 2 weeks
Explanation:
A paycheck is a salary the employee or worker gets. Hope receives a paycheck every 2 weeks.
What is a paycheck?A paycheck means the salary or wages an employee or worker gets for doing the work under their employment by the employer.
The frequency of a paycheck usually depends on the period of work. i.e a month in most cases but here Hope receives a paycheck every 2 weeks.
Therefore, the above statement aptly describes the paycheck.
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Assume the state of Alabama placed a tax on playing cards of 6 cents per pack. If the state generated $48600 in revenue, how many packs of cards were sold?
Answer:
the number of packs of cards sold is 810,000 units
Explanation:
The computation of the number of packs of cards sold is shown below:
Tax revenue = tax per good × goods
$48,600 = 0.06 × Q
Q =$48,600 ÷ 0.06
Q = 810,000
hence, the number of packs of cards sold is 810,000 units
We simply applied the above formula so that the correct value could come
And, the same is to be considered
Price Quantity Demanded by Michelle Quantity Demanded by Laura Quantity Demanded by Hillary$5 5 4 11$4 6 6 13$3 7 8 15$2 8 10 17$1 9 12 19$0 10 14 21If the market consists of Michelle, Laura, and Hillary and the price falls by $1, the quantity demanded in the market increases bya. 2 units.b. 4 units.c. 5 units.d. 3 units.
Answer:
The correct option is c. 5 units.
Explanation:
Note: The data in this question are merged together. They are therefore sorted before the question is answered. See the attached pdf file for the complete question with the sorted data.
The explanation to the answer is now given as follows:
Note: See the attached excel file for the calculation of change in price and Quantity Demanded from the bottom.
From the table in the question and the attached excel file, whenever price changes (falls or increases) by $1, we have:
Change in Quantity Demanded by Michelle = 1
Change Quantity Demanded by Laura = 2
Change Quantity Demanded by Hillary = 2
Total change in quantity demanded = Change in Quantity Demanded by Michelle + Change Quantity Demanded by Laura + Change Quantity Demanded by Hillary = 1 + 2 + 2 = 5 units
From the above calculation therefore, if the market consists of Michelle, Laura, and Hillary and the price falls by $1, the quantity demanded in the market increases by the total change in quantity demanded, i.e. by 5 units.
Therefore, the correct option is c. 5 units.
Both excess supply and excess demand are a result of
equilibrium
disequilibrium
overproduction.
elasticity
Answer:
disequilibrium
Explanation:
Disequilibrium is the state of the market when the external and internal forces are stopping from achieving the market balance, so the market is excessively falling out this balance. It can be short-term, or long-term
Disequilibrium happens when the supply is not equal to the demand, when the market is inequal, it can lead to excess supply and excess demand.
Excess demand and excess supply only affect the market as a result of disequilibrium.
What is Disequilibrium?This is a scenario where the quantity supplied does not match the quantity demanded at a given price. Leads to a lost of balance in economy as well as price problems.When the demand is not enough to meet the supply, this disequilibrium is called excess supply. The reverse is excess demand.
In conclusion, option B is correct.
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Eileen and Hal, a married couple filing jointly, received $10,000 of Series I bond interest in 2020. If all the proceeds of the redeemed bond were used to pay qualified education expenses and their modified adjusted gross income exceeded the applicable dollar amount by $30,000, how much of the bond interest could they exclude from income?
Answer:
$0 amount of interest to be excluded from Income
Explanation:
Interest income on bond can be excluded from Income if following two condition are fulfill.,
a) Bond are Series 1 or Series EE bond bought after 1989
b) Redemption money is used for the payment or Expense of Qualified Education expense
If the boNd amount is more then Qualified Expense only amount of Interest can be excluded from the Income . and Further this interest are phase out if exceed the threshold based on the level of Modified Adjusted Gross Income. Phaseout Threshold for Couple filling jointly for 2020 is $123,550 and phaseout limit is $153,550
As Given that MAGI exceeds the phaseout threshold by $30000
Phaseout Reduction = Redemption amount × Income Exceed by Phaseout thresold / (Differences of Phaseout thresold - Phaseout limit ie $30000)
Phaseout Reduction = 10000×30000/(153550-123550)
Phaseout Reduction = 10000
Tax free Redemption amount of Bond = $10000-$10000
Tax free Redemption amount of Bond = $0
$0 amount of interest to be excluded from Income
Let's solve this step by step:
Interest income on bond can be excluded from Income if following two condition are fulfill.,
a) Bond are Series 1 or Series EE bond bought after 1989
b) Redemption money is used for the payment or Expense of Qualified Education expense
If the bond amount is more then Qualified Expense only amount of Interest can be excluded from the Income and further this interest are phase out if exceed the threshold based on the level of Modified Adjusted Gross Income.
Phaseout Threshold for Couple filling jointly for 2020 is $123,550 and phaseout limit is $153,550
As Given that MAGI exceeds the phaseout threshold by $30000
Phaseout Reduction = Redemption amount × Income Exceed by Phaseout thresold / (Differences of Phaseout thresold - Phaseout limit i.e. $30000)
Phaseout Reduction = [tex]\frac{10000 *30000}{(153550-123550)}[/tex]
Phaseout Reduction = 10000
Tax free Redemption amount of Bond = $10000-$10000
Tax free Redemption amount of Bond = $0
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The following balances are available for Chrisman Company:
December 31, 2016 December 31, 2015
Cash $8,000 $10,000
Accounts receivable 20,000 15,000
Inventory 15,000 25,000
Prepaid rent 9,000 6,000
Land 75,000 75,000
Plant and equipment 400,000 300,000
Accumulated depreciation (65,000) (30,000)
Totals $462,000 $401,000
Accounts payable $12,000 $10,000
Income taxes payable 3,000 5,000
Short-term notes payable 35,000 25,000
Bonds payable 75,000 100,000
Common stock 200,000 150,000
Retained earnings 137,000 111,000
Totals $462,000 $401,000
Bonds were retired during 2016 at face value, plant and equipment were acquired for cash, and common stock was issued for cash. Depreciation expense for the year was $35,000. Net income was reported at $26,000.
Required:
Prepare a statement of cash flows for 2016 using the indirect method in the Operating Activities section. Use the minus sign to indicate cash payments, cash outflows, or decreases in cash.
Answer:
Chrisman Company
Statement of Cash Flows for the year ended December 31, 2016
(using the indirect method):
Operating activities:
Adjusted cash from operations $61,000
Changes in working capital:
Accounts receivable -5,000
Inventory 10,000
Prepaid rent -3,000
Accounts payable 2,000
Income taxes payable -2,000
Short-term notes payable 10,000
Net cash from operating activities 73,000
Investing activities:
Equipment -100,000
Financing activities:
Bonds -25,000
Common stock 50,000 25,000
Net cash flows -$2,000
Explanation:
a) Data and Calculations:
December 31 December 31 Changes
2016 2015
Cash $8,000 $10,000 -$2,000
Accounts receivable 20,000 15,000 5,000
Inventory 15,000 25,000 -10,000
Prepaid rent 9,000 6,000 3,000
Land 75,000 75,000 0
Plant and equipment 400,000 300,000 100,000
Accumulated depreciation (65,000) (30,000) 35,000
Totals $462,000 $401,000
Accounts payable $12,000 $10,000 $2,000
Income taxes payable 3,000 5,000 -2,000
Short-term notes payable 35,000 25,000 10,000
Bonds payable 75,000 100,000 -25,000
Common stock 200,000 150,000 50,000
Retained earnings 137,000 111,000 26,000
Totals $462,000 $401,000
b) Net income $26,000
Depreciation 35,000
Adjusted cash from operations = $61,000
c) The statement of cash flows can be prepared using either the direct method or the indirect method. The indirect method affects mainly the operating activities section and starts with the net income and adjusts it with non-cash items before considering the changes in the working capital. The statement is a financial statement that classifies the cash flows during the period into three main categories: operating, investing, and financing activities. There are also non-cash flows involving accounts that do not cause any cash flows.
The following items are taken from the financial statements of Ivanhoe Company at December 31, 2022.
Land $197,900
Accounts receivable 22,000
Supplies 10,200
Cash 12,050
Equipment 82,100
Buildings 261,200
Land improvements 45,900
Notes receivable (due in 2023) 6,200
Accumulated depreciation—land improvements 12,700
Common stock 80,000
Retained earnings (December 31, 2022) 495,000
Accumulated depreciation—buildings 33,600
Accounts payable 9,800
Mortgage payable 91,900
Accumulated depreciation—equipment 18,950
Interest payable 3,400
Income taxes payable 15,500
Patents 46,700
Investments in stock (long-term) 71,300
Debt investments (short-term) 5,300
Required:
Prepare a classified balance sheet. Assume that $9,300 of the mortgage payable will be paid in 2023.
Answer:
Ivanhoe Company
Balance sheet
Particulars Amount Amount
Assets
Current assets
Cash 12,050
Account receivables 22,000
Supplies 10,200
Debt investment 5300
Total current assets 49,550
Fixed assets
Land 197,900
Equipment 82,100
Less acc. depreciation (18,950)
Net equipment 63,150
Building 261,200
Less acc. depreciation (33,600)
Net building 227600
Land improvements 45,900
Less acc. depreciation (12,700)
Net land improvements 33,200
Note receivables 6,200
Patents 46,700
Investment in stock 71,300
Total fixed assets 646,050
Total assets 695,600
Liabilities and shareholders equity
Current liabilities
Account payable 9800
Interest payable 3400
Income tax payable 15,500
Total current liabilities 28,700
Long term liabilities
Mortgage payable 91,900
Total long term liabilities 91,900
Shareholders equity
Common stock 80,000
Retained earnings 495,000
Total shareholders equity 575,000
Total liabilities and shareholders equity$69,5600
Sheridan Inc. purchased land, building, and equipment from Laguna Corporation for a cash payment of $371,700. The estimated fair values of the assets are land $70,800, building $259,600, and equipment $94,400. At what amounts should each of the three assets be recorded?
Answer:
Land = $61,950
Building = $227,150
Equipment = $82,600
Explanation:
Total Asset Fair Value = $70,800+$259,600+$94,400
Total Asset Fair Value = $424,800
Recorder Amount
Land = [$70,800/$424,800]$371,700
Land = $61,950
Building = [$259,600/$424,800]$371,700
Building = $227,150
Equipment = [$94,400/$424,800]$371,700
Equipment = $82,600
You decide to invest $20,500 in Bank of America and $14,500 in Twitter. What is the portfolioâs beta? Bank of America beta: 1.27 Twitter beta: 1.96
Answer:
Portfolio Beta = 1.555857143 rounded off to 1.56
Explanation:
The portfolio beta is the function of the weighted average of the individual stock betas that form up the portfolio. The formula to calculate the beta of a portfolio containing two stock is as follows,
Portfolio Beta = wA * Beta of A + wB * Beta of B
Where,
w is the weight of each stock
As the investment in Stock of Bank of America is 20500 and the investment in stock of Twitter is 14500, the total investment in the portfolio will be,
Total investment = 20500 + 14500 = 35000
Portfolio Beta = 20500 / 35000 * 1.27 + 14500 / 35000 * 1.96
Portfolio Beta = 1.555857143 rounded off to 1.56
If during the year the portfolio manager sells all of the holdings of stock D and replaces it with 200,000 shares of stock E at $50 per share and 200,000 shares of stock F at $25 per share, what is the portfolio turnover rate?The composition of the Fingroup fund portfolio is as follows:Stock shares PriceA 200,000 $35B 300,000 40C 400,000 20D 600,000 25 The fund has not borrowed any funds but its accrued management fee with the portfolio manager currently totals 30,000. there are 4 million funds outstanding ? What is the net asset value of the fund?
Answer:
$10.49
Explanation:
The computation of the net asset value of the fund is shown below:
= (Market value of the assets - market value of the liabilities) ÷ number of oustanding shares
where,
Market value of assets is
= (200,000 × $35) + (300,000 × $40) + (400,000 × 20) + (600,000 × 25)
= $42,000,000
So, the net asset value of the fund is
= ($42,000,000 - $30,000) ÷ (4,000,000)
= $10.49
Price discrimination: Multiple Choice tends to decrease the profits of the competitive firm. is more successful if one consumer can resell the product to another. can benefit consumers with a lower willingness to pay as compared to other consumers in the market. can be a successful strategy for any firm in a competitive market.
Answer:
can benefit consumers with a lower willingness to pay as compared to other consumers in the market.
Explanation:
Price discrimination occurs when a supplier sells a product to different customers at different prices.
The criteria for discrimination can be as a result of income, social class, demographics and so on.
Price discrimination is not a good strategy in a competitive market as consumers will move to other suppliers when the price is not conducive.
However a consumer who is less willing to buy the product can benefit from this because the supplier is open to lowering the price depending on certain criteria
A home furniture store, David's Furnishings, lowers its prices below those of
their competitors, Ada's Home Store. A price war then ensues. What must the
response of Ada's Home Store have been in order for the price war to begin?
A. Ada's Home Store started a marketing campaign against David's
Furnishings and their lower quality.
B. Ada's Home Store took David's Furnishings to court in an attempt
to make them raise their prices back up.
C. Ada's Home Store raised prices to show consumers that their
products are better.
O D. Ada's Home Store lowered prices even lower than David's
Furnishings did.
Answer:
d.
Explanation:
The response of Ada's Home Store has been in order for the price war to begin as Ada's Home Store lowered prices even lower than David's Furnishings did. Thus option D is correct.
What is the Price?A price refers to the amount which takes place between two individuals when performing the exchange of goods and services. This price is determined by the willingness of both parties involved in the exchange.
A price war took place when the competitors lower their prices in order to retain more customers will create conflicts in the market.
In the given case when an organization named David's Furnishings lower its prices with its competitors to begin a price war the competitors also lower their prices in order to capture the market gain effectively.
Therefore, option D is appropriate.
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On August 1, Kim Company accepted a 90-day note receivable as payment for services provided to Hsu Company. The terms of the note were $9,000 face value and 7% interest. On October 30, the journal entry to record the collection of the note should include a a.Interest Revenue for $358. b.Credit to Interest Revenue for $158. c.Notes Receivable for $258. d.Interest Receivable for $58.
Answer:
b.Credit to Interest Revenue for $158.
Explanation:
the journal entry to record the acceptance of the note receivable:
August 1, note receivable accepted from Hsu Company
Dr Notes receivable 9,000
Cr Service revenue 9,000
the journal entry to record the collection of cash:
October 30, cash collected from Hsu Company
Dr Cash 9,158
Cr Notes receivable 9,000
Cr Interest revenue 158
A company will sell N units of a product after spending $x thousand in advertising, as given by N = 60x - x^2 5 \leq x \leq 30approximately what increase in sales will result by increasing the advertising budget from $10,000 to $11,000 and from $20,000 to $21,000?
Answer:
Explanation:
Given that:
[tex]N(x) = 60 x - x^2[/tex] where; 5 ≤ x ≤ 30
SO by increasing the advertising budget from 10,000 to 11000; the budget is increased from 10 to 11 since x is in thousands.
∴
Increase in sales = N(x₂) - N(x₁)
Increase in sales = N(11) -N(10)
Increase in sales = (60(11)-11²) - (60(10) -10²)
Increase in sales = (660 - 121) - (600 - 100)
Increase in sales = 539 - 500
Increase in sales = 39 units
By increasing the advertising budget from 20,000 to 21000; the budget is increased from 20 to 21 since x is in thousands.
∴
Increase in sales = N(x₂) - N(x₁)
Increase in sales = N(21) -N(20)
Increase in sales = (60(21)-21²) - (60(20) -20²)
Increase in sales = (1260 - 441) - (1200 - 400)
Increase in sales = 819 - 800
Increase in sales = 19 units
Determine whether the following bonds payable will be issued at par value, at a premium, or at a discount. a. Evergreen Company issued bonds payable that pay stated interest of 6 1/4%. On the date of issuance, the market interest rate was 6 3/4%.b. Seven Hills, Inc., issued 3% bonds payable when the market rate was 3 3/4%. c. Flagstaff Corporation issued 5% bonds when the market interest rate was 5%. d. The market interest rate is 4%. Rainforest Corp. issues bonds payable with a stated rate of 5 1/2%.
Answer:
b is you answer
Explanation:
One of the potential benefits of ____________ from the company's perspective is that customers will be buying a larger range of services or products from the company than they otherwise might have.
a. price bundling
b. prestige pricing
c. value pricing
d. odd-even pricing
e. informative pricing
Answer:
a. price bundling
Explanation:
Price bundling in business can be defined as a strategic process which typically involves the combination of several goods and services into a single unit for a relatively lower price or cost.
One of the potential benefits of price bundling from the company's perspective is that customers will be buying a larger range of services or products from the company than they otherwise might have.
Sarinda consumes crab cakes and tuna. Sarinda's utility increases with the consumption of crab cakes, but her utility neither increases nor decreases with the consumption of tuna. Assuming tuna is on the x-axis and crab cake is on the y-axis, what do Sarinda's indifference curves look like?a. vertical lines.b. downward-sloping lines.c. horizontal lines.d. upward-sloping lines from the origin
Answer:
a. vertical lines
Explanation:
To exploit an expected increase in interest rates, an investor would most likely:_______.a. sell Treasury bond futures. b. take a long position in wheat futures.
Answer:
a. sell Treasury bond futures
Explanation:
To exploit an expected increase in interest rates, an investor would most likely sell Treasury bond futures. Since treasury bond prices are inversely related to interest rates, an increase in interest rates will cause a decline in price of treasury bonds. By selling Treasury Bond futures, investor will have short position which will benefit from the increase in interest rates.
Denise sells silk scarves at a hobby fair. Each scarf sells for $25 and has a variable cost of $15. Denise’s booth rental for one day is $30. Based on this information, what total revenue amount does Denise need to earn to break-even?
Answer:
Break-even point (dollars)= $75
Explanation:
Giving the following information:
Each scarf sells for $25 and has a variable cost of $15. Denise’s booth rental for one day is $30.
To calculate the break-even point in dollars, we need to use the following formula:
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 30 / [(25 - 15)/25]
Break-even point (dollars)= $75
During March, a firm expects its total sales to be $160,000, its total variable costs to be $95,000, and its total fixed costs to be $25,000. The contribution margin for March is:a. $65,000.b. $90,000.c. $120,000.d. $40,000.e. $25,000.
Answer:
a. $65,000
Explanation:
Calculation for the contribution margin for March
Total sales 160,000
Less total variable 95,000
Contribution margin 65,000
(160,000-95,000)
Therefore the The contribution margin for March is: $65,000
Entity A supplies planed timber, paint, varnish, springs, upholstery, and cushioning to EntityB, which produces a ready to use furniture. Entity C is the marketing department of Entity B. In this context, ______.a. A is an upstream supply chain member, while C is the downstream chain memberb. C is an upstream supply chain member, while A is the downstream chain memberc. B is an upstream supply chain member, while A is the downstream chain memberd. C is an upstream supply chain member, while B is the downstream chain member
Answer:
a. A is an upstream supply chain member, while C is the downstream chain member
Explanation:
Supply chain management can be defined as the effective and efficient management of the flow of goods and services as well as all of the production processes involved in the transformation of raw materials into finished products that meet the insatiable want and need of the consumers. Generally, the supply chain management involves all the activities associated with planning, execution and supply of finished goods and services to the consumers.
The key principle of supply chain management can be best summed up as collaboration between multiple firms. These multiple firms include a company that is saddled with the responsibility of manufacturing, a wholesaler, and a retailer who typically sells the products to the customers or consumers.
Basically, these three (3) firms or individuals are required to collaborate with each other so as to meet the needs of the customers in a timely manner or fashion and at a fair price too.
Entity A supplies planed timber, paint, varnish, springs, upholstery, and cushioning to Entity B, which produces a ready to use furniture. Entity C is the marketing department of Entity B.
In this context, Entity A is an upstream supply chain member, while Entity C is the downstream chain member.
The upstream supply chain member are the suppliers of raw materials to another organization for its production line while the downstream chain member are the intermediary between the manufacturer and the consumer.
Jeter Corporation had net income of $232,000 based on variable costing. Beginning and ending inventories were 8,000 units and 14,000 units, respectively. Assume the fixed overhead per unit was $6 for both the beginning and ending inventory. What is net income under absorption costing?a. $316,000b. $268,000c. $304,000d. $364,000e. $232,000
Answer:
d. $364,000
Explanation:
Net income under absorption costing is computed as;
= Net income under variable costing + [(Closing inventory - Opening inventory) × Fixed overhead per unit.
Given that;
Net income under variable costing = $232,000
Closing inventory = 14,000 units
Opening inventory = 8,000 units
Fixed overhead per unit = $6
Therefore,
Net income under absorption costing = $232,000 + [(14,000 + 8,000) × $6 ]
= $232,000 + $132,000
= $364,000
Net income under absorption costing is $364,000
g Which one best completes the following sentence: According to the IRR rule, an investment should be ______ if the IRR is ______ the required rate of return. Group of answer choices Rejected; greater than Accepted; less than Accepted; greater than Accepted; equal to
Answer:
Accepted; greater than
Explanation:
Internal rate of return is a way to determine if a project is worth pursuing. It is a series of future cash flows that an investment is expected to return to the investors.
The required rate of return is the minimum amount that the investor will accept from a project.
The IRR rule requires that the Internal rate of return be higher than the required rate of return
A stock has a correlation with the market of 0.49. The standard deviation of the market is 25%, and the standard deviation of the stock is 33%. What is the stock's beta?
A.) 1.55
B.) 0.65
C.) 0.35
D.) 0.37
Answer:
Stock's beta = 0.65 (Approx)
Explanation:
Given:
Correlation = 0.49
Standard deviation of stock (SDs) = 33% = 0.33
Standard deviation of market (SDm) = 25% = 0.25
Find:
Stock's beta
Computation:
Stock's beta = Correlation(SDs) / SDm
Stock's beta = 0.49 (0.33) / 0.25
Stock's beta = 0.65 (Approx)
Selling and administrative expenses include all of the following except:____________. a. shipping document preparation. b. post-sale technical support. c. factory overhead. d. customer return processing.
Answer:
c. factory overhead.
Explanation:
Selling and administrative expenses can be defined as the operating expenses which comprises of all the costs incurred in the smooth running of a business.
Selling and administrative expenses include all of the following shipping document preparation, post-sale technical support, and customer return processing except factory overhead.
A factory overhead can be defined as the amount of money incurred by a company or business entity in the course of its manufacturing process.
This ultimately implies that, factory overhead refers to cost incurred in the manufacturing process of finished goods and cannot be linked directly to the goods.
The factory overhead costs include costs such as indirect labor, rent, depreciation, utility bills, property taxes etc.
Paul agrees to sell his clothing store to Michael and, as part of the sale, to execute a covenant not to compete promising not to open a similar store within one thousand miles for the next twenty years. A court reviewing the terms of the covenant would likely find that it is:________. a) unenforceable because all covenants not to compete are unreasonable. b) unreasonable as to both geographical scope and duration c) unreasonable with regard to duration d) enforceable
Answer:
d) enforceable
Explanation:
A court reviewing the terms of the covenant would likely find that it is enforceable. This is a standard clause found in many contracts and is also known as Non-compete clause. It is standard because a seller that has the experience of running a similar business can sell the business collect the profit from the sale and open create another similar business with little to no capital and quickly outperform their previous business due to the amount of experience that they have. In order to prevent this, many buyers require this clause to be added to the sales contract.