Which of the following statements is true concerning domestic expansion of a business?

Multiple Choice

• Cash funding requirements will be lower to establish a new corporation than a corporate division if the expansion activity incurs substantial start-up losses.

• Cash funding requirements will be higher to establish a new corporation than a corporate division if the expansion activity incurs substantial start-up losses.

• Obligations of a new division will have no impact on the founding corporation.

• The main advantage of incorporating an expansion activity is the use of start-up losses from the new corporation against income from the founding corporation.