Exam 17: Common and Preferred Stock Financing

The particular type of shareholder voting used has become less important with the influence of takeovers, leveraged buy-outs, and other challenges to management control.

"Dutch auction" preferred stock

Bondholders never have any control over the actions of a firm.

To the corporate investor, preferred stock offers which of the following advantages?

The market price of "floating rate" preferred stock is less volatile than that of regular preferred stock.

A rights offer made to existing shareholders with the sole purpose of making it more difficult for another firm to acquire the company is called

Which of the following is NOT a primary investor in preferred stock?

The following are primary purchasers of preferred stock except

Which of the following is not a very common feature of preferred stock?

Participating preferred stock gives its owners voting rights.

An individual investing in preferred stock receiving a before-tax preferred yield of 6.75% and having a tax rate of 25% would receive an after-tax preferred yield of _____. Assume the tax rate on dividends is 15%.

"Pre emptive rights" means that

Preferred stock would generally provide a lower before-tax yield to investors than secured debt due to its lower risk.

A possible advantage to a rights offering is that

If a preferred stock is of the cumulative type,

A proxy is

Floating rate preferred stock would be ideal to have when the stock price fluctuates and when there are tax benefits to owning preferred stock

If a corporation pays no taxes because it is losing money, a preferred stock issuance becomes more attractive relative to a debt issuance.

Buggy Whip Manufacturing Company is issuing preferred stock yielding 8%. Selten Corporation is considering buying the stock. Assume that Buggy's tax rate is 0% due to continuing heavy tax losses, and Selten's tax rate is 34%. What is the after-tax preferred yield for Selten? Assume the tax rate on dividends is 15%.

The floating rate feature on preferred stock causes more volatility in its price.