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Author Question: The auto dealers coverage form includes coverage for violating odometer (mileage) disclosure laws ... (Read 41 times)

cmoore54

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on: Jul 11, 2018
The auto dealers coverage form includes coverage for violating odometer (mileage) disclosure laws and selling a vehicle where there was a title defect. Which coverage under the auto dealers coverage form would respond to such claims?
 
  A) garagekeepers liability coverage
  B) liability coverage for covered autos
  C) general liability insurance coverage
  D) acts, errors or omissions liability coverage

Question 2

Explain why the author uses the following formula to explain the amount of money a firm needs to repay an outstanding principal balance.
 
  Support your answer with n example that shows how much in EBT a firm in a 30 tax bracket would require to repay 1,000 in principal.
  Before-tax cost of debt repayment = (principal repayment) / (1 - tax rate)


medine

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Reply #1 on: Jul 11, 2018
Answer to Question 1

Answer: D

Answer to Question 2

While debt interest payments are made before taxes, principal payments are not. Thus, a firm must earn enough in EBT so that after paying taxes there remain sufficient funds to pay the principal. For example, a firm in a 30 tax bracket with a 1,000 required principal repayment would need to have 1,000/(1-.30 ) = 1,428.57 in EBT so that they would have sufficient funds to pay both taxes and principal.


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