Question

In: Finance

3. A business valued at $3,000,000 has 3 partners. Each of the 3 partners buys a...

3. A business valued at $3,000,000 has 3 partners. Each of the 3 partners buys a $500,000 life insurance policy for purposes of a buy/sell agreement on each of the other partners. Which of the following is/are true?

1. This is an example of an entity purchase plan.

2. This is an example of a cross purchase plan.

3. The buy/sell agreement is under-funded.

a. 1 only         b. 2 only         c. 1 and 3       d. 2 and 3

Solutions

Expert Solution

As per the above information given:

Ans- (b) 2 Only

Reason:- Since the business has 3 partners and by implementing Cross purchase plan strategy the business will become both the owner and beneficiary of the policy.

jeff jeffy answered 2 years ago
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