MTEL Business Practice Exam

Correct Response: B. Since the operation issues $50,000 of common stock, it initially has $50,000. Paying dividends of $20,000 will leave $50,000 – $20,000 = $30,000. Paying back a bank loan of $10,000 will leave $30,000 – $10,000 = $20,000 of net cash. $(10,000) (A) is the amount of the bank loan, $30,000 (C) is the amount remaining after paying shareholders, and $50,000 (D) is the amount raised by selling stock.