Exam 17: Common and Preferred Stock Financing

Krager Foods Corp.has 700,000 shares outstanding.General Grocery,one of its subsidiaries,is disgusted with current management practices and is trying to get some of its own people elected to the board of directors.There are 15 directors,and General Grocery controls proxies for 87,501 shares. A)Under cumulative voting,how many directors can General Grocery elect? B)How many shares will General Grocery have to acquire in order to elect 8 directors?

Preferred stock is often sold by companies:

Which of the following statements about floating rate preferred stock is true?

The Jersey Corp.is considering four investments.Which provide the highest aftertax return for Jersey Corp.If it is in the 40% tax bracket?

Shares purchased through a rights offering may carry lower margin requirements.

Pre-emptive rights provision ensures that management cannot subvert the position of present shareholders by selling shares to outside interests without first offering them to current shareholders.

The following are primary purchasers of preferred stock except:

After a rights offering,the common stock will sell at the subscription price.

Davis Aquatic Corp.has 300,000 shares of preferred stock outstanding that is cumulative.The dividend is $8.00 per share and has not been paid for 2 years.If Davis Aquatic Corp.retained earnings and after tax income this year total $3 million,what could be the maximum payment to the preferred shareholders on a per share basis?

American Depositary Receipts:

Nine rights are necessary to purchase one share of stock $99.A right sells for a $7.70.The ex-rights value of the stock is:

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