1.Sewell's cousin, Bob, borrows $500,000 from a bank and purchases the franchise from Sewell.2.Sewell pays the corporation $500,000 to acquire all its stock.3.The corporation buys the franchise from Cousin Bob.4.Cousin Bob repays the $500,000 loan to the bank.If Stan bought the franchise for $50,000, why would he then go and overstate the value of the franchise for $500,000?This situation is unethical due to the intent to deceive. Creditors and investors can easily be harmed by these actions of overstating the value of a purchase. The value of the franchise is clearly worth $50,000 and not $500,000 and therefore, the creditors and investors would hurt the corporation because they are investing in a franchise that will not reach that value of $500,000. They are walkingin blind with a false balance sheet of an overstated value for the franchise.The only reason the franchise reached that $500,000 value was due to Cousin Bob “purchasing” the
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