Question 1

A proxy is

Accepted Answer

A) a device for circumventing regular voting procedures. 
B) a coupon attached to each share of stock and used by the shareholder in casting his vote on current issues. 
C) an authorization of a registered stockholder to another person to act in her place at the meeting. 
D) a warrant allowing a stockholder to purchase a specified number of additional shares at a given price. 
A) a device for circumventing regular voting procedures. 
B) a coupon attached to each share of stock and used by the shareholder in casting his vote on current issues. 
C) an authorization of a registered stockholder to another person to act in her place at the meeting. 
D) a warrant allowing a stockholder to purchase a specified number of additional shares at a given price.

Question 2

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

Accepted Answer

A) A higher yield than debt, everything else being equal before taxes. 
B) 30% of preferred dividends are tax-exempt. 
C) 70% of preferred dividends are tax-exempt. 
D) 70% of preferred dividends are tax-exempt and have a higher yield than debt, all else equal before taxes. 
A) A higher yield than debt, everything else being equal before taxes. 
B) 30% of preferred dividends are tax-exempt. 
C) 70% of preferred dividends are tax-exempt. 
D) 70% of preferred dividends are tax-exempt and have a higher yield than debt, all else equal before taxes.

Question 3

Which of the following actions will provide the shareholders with the most total wealth when a company conducts a rights offering?

Accepted Answer

A) Exercise the rights for new shares. 
B) Sell the rights themselves and hold existing shares and cash. 
C) Exercise the rights and sell the shares. 
D) None of these options 
A) Exercise the rights for new shares. 
B) Sell the rights themselves and hold existing shares and cash. 
C) Exercise the rights and sell the shares. 
D) None of these options

Question 4

Under cumulative voting, holding 30% of the shares outstanding will guarantee an investor the ability to elect three of nine directors to the board.

Accepted Answer

A) True 
 B)False

Question 5

The effect of a rights offering on a stockholder is

Accepted Answer

A) to increase his/her wealth. 
B) to increase his/her wealth only if the new stock is purchased. 
C) to decrease his/her wealth unless the stock is purchased. 
D) to decrease his/her wealth if nothing is done. 
A) to increase his/her wealth. 
B) to increase his/her wealth only if the new stock is purchased. 
C) to decrease his/her wealth unless the stock is purchased. 
D) to decrease his/her wealth if nothing is done.

Question 6

Fritz Corporation has 800,000 shares of preferred stock and 1,800,000 shares of common stock. The cumulative preferred stock has a stated dividend of $1.75 per share. Under normal conditions, Kreisler pays out preferred dividends and 30% of remaining earnings to common stockholders; however, because of a severe recession, Fritz retained all earnings last year. This year, Fritz earned net income of $5 million.
Calculate the dividend per share to be received by the common stockholders this year.

Accepted Answer

None

Question 7

When comparing common stock of the same company, it is fair to say that

Accepted Answer

A) all shares, no matter how many classes, are all created with the same equal rights. 
B) companies sometimes have two different classes of shares with unequal rights to dividends and votes. 
C) the Securities and Exchange Commission allows only one class of common stock. 
D) investors are indifferent between class A and class B shares. 
A) all shares, no matter how many classes, are all created with the same equal rights. 
B) companies sometimes have two different classes of shares with unequal rights to dividends and votes. 
C) the Securities and Exchange Commission allows only one class of common stock. 
D) investors are indifferent between class A and class B shares.

Question 8

American Depository Receipts

Accepted Answer

A) have annual reports and financial statements presented in English. 
B) pay dividends in dollars. 
C) are more liquid and less expensive to buy than foreign stock. 
D) All of these are true. 
A) have annual reports and financial statements presented in English. 
B) pay dividends in dollars. 
C) are more liquid and less expensive to buy than foreign stock. 
D) All of these are true.

Question 9

Preferred stock is often sold by companies

Accepted Answer

A) wanting to balance their capital structures. 
B) that have a large amount of debt relative to equity. 
C) looking for the taxable advantages of preferred dividends over common stock dividends. 
D) that have a large amount of debt relative to equity and that want to balance their capital structures. 
A) wanting to balance their capital structures. 
B) that have a large amount of debt relative to equity. 
C) looking for the taxable advantages of preferred dividends over common stock dividends. 
D) that have a large amount of debt relative to equity and that want to balance their capital structures.

Question 10

Which one of the following statements is NOT true?

Accepted Answer

A) Poison pills discourage hostile takeovers. 
B) Poison pills discourage potential high takeover bids. 
C) Stockholders have to approve the acceptance of poison pill strategies before a corporation can use them. 
D) Many institutional investors are opposed to the poison pill. 
A) Poison pills discourage hostile takeovers. 
B) Poison pills discourage potential high takeover bids. 
C) Stockholders have to approve the acceptance of poison pill strategies before a corporation can use them. 
D) Many institutional investors are opposed to the poison pill.

Question 11

A poison pill will raise the potential for maximizing shareholder value because it deters takeover bids.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following best represents a benefit of a rights offering?

Accepted Answer

A) Rights offerings increase return on equity. 
B) Rights offerings substantiate higher debt-to-equity ratios. 
C) Rights offerings have lower margin requirements. 
D) None of these options 
A) Rights offerings increase return on equity. 
B) Rights offerings substantiate higher debt-to-equity ratios. 
C) Rights offerings have lower margin requirements. 
D) None of these options

Question 13

Which would NOT be considered an ADR stock in the U.S.?

Accepted Answer

A) Heineken 
B) Nestle 
C) Sony 
D) Intel 
A) Heineken 
B) Nestle 
C) Sony 
D) Intel

Question 14

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

Accepted Answer

A) Cumulative dividends 
B) Voting rights 
C) Call feature 
D) The conversion feature 
A) Cumulative dividends 
B) Voting rights 
C) Call feature 
D) The conversion feature

Question 15

Participating preferred stock is advantageous to common stockholders.

Accepted Answer

A) True 
 B)False

Question 16

To the individual recipient, preferred stock dividends offer no advantage over common stock dividends.

Accepted Answer

A) True 
 B)False

Question 17

Match between columns
                        Premises: All directors may be elected by a controlling vote of more than 50%.
A "hybrid" security combining features of both common stock and debt.
Specifies the amount of cash or equity that must be deposited with a brokerage firm, with the balan
Shareholders are allowed to multiply their total shares times the number of directors being elected to determine their total number of votes.
The privilege accorded to current common stockholders of maintaining their ownership percentage on new issues of common stock.
A situation where the purchase of common stock during a rights offering no longer includes the rights to purchase additional shares of common stock.
The situation where the purchase of common stock includes an equal number of rights attached to the stock.
Commonly arises from the sale of new common stock to current stockholders.
Holders of this security are the owners of the company.

Accepted Answer

The Answer of common stock and ex-rights and cumulative voting is...

Question 18

Tricki Corp stock sells for $45 rights-on, and the subscription price is $35. Ten rights are required to purchase one share. Tomorrow the stock of Tricki will go ex-rights. What is the price of Tricki expected to be when it begins trading ex-rights?

Accepted Answer

A) $47.23 
B) $44.00 
C) $44.09 
D) $45.00 
A) $47.23 
B) $44.00 
C) $44.09 
D) $45.00

Question 19

American Depository Receipts (ADRs) are certificates that give foreign stockholders a legal claim on U.S. companies' foreign stock.

Accepted Answer

A) True 
 B)False

Question 20

The current market value of Markowitz Corp stock is $61. If 10 rights are required to buy one additional share of Markowitz at the subscription price of $50, then the rights are worth $1.00.
Based on Formula 17-3: (61 - 50)/(10 + 1) = $1

Accepted Answer

A) True 
 B)False

A proxy is

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

Which of the following actions will provide the shareholders with the most total wealth when a company conducts a rights offering?

Under cumulative voting, holding 30% of the shares outstanding will guarantee an investor the ability to elect three of nine directors to the board.

The effect of a rights offering on a stockholder is

When comparing common stock of the same company, it is fair to say that

American Depository Receipts

Preferred stock is often sold by companies

Which one of the following statements is NOT true?

A poison pill will raise the potential for maximizing shareholder value because it deters takeover bids.

Which of the following best represents a benefit of a rights offering?

Which would NOT be considered an ADR stock in the U.S.?

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

Participating preferred stock is advantageous to common stockholders.

To the individual recipient, preferred stock dividends offer no advantage over common stock dividends.

Tricki Corp stock sells for $45 rights-on, and the subscription price is $35. Ten rights are required to purchase one share. Tomorrow the stock of Tricki will go ex-rights. What is the price of Tricki expected to be when it begins trading ex-rights?

American Depository Receipts (ADRs) are certificates that give foreign stockholders a legal claim on U.S. companies' foreign stock.

The current market value of Markowitz Corp stock is $61. If 10 rights are required to buy one additional share of Markowitz at the subscription price of $50, then the rights are worth $1.00. Based on Formula 17-3: (61 - 50)/(10 + 1) = $1

The Goals and Activities of Financial Management

Review of Accounting

Financial Analysis

Financial Forecasting

Operating and Financial Leverage

Working Capital and the Financing Decision

Current Asset Management

Sources of Short-Term Financing

The Time Value of Money

Valuation and Rates of Return

Cost of Capital

The Capital Budgeting Decision

Risk and Capital Budgeting

Capital Markets

Investment Banking: Public and Private Placement

Long-Term Debt and Lease Financing

Dividend Policy and Retained Earnings

Convertibles, Warrants and Derivatives

External Growth Through Mergers

International Financial Management

Filters

Exam 17: Common and Preferred Stock Financing

A proxy is

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

Which of the following actions will provide the shareholders with the most total wealth when a company conducts a rights offering?

Under cumulative voting, holding 30% of the shares outstanding will guarantee an investor the ability to elect three of nine directors to the board.

The effect of a rights offering on a stockholder is

When comparing common stock of the same company, it is fair to say that

American Depository Receipts

Preferred stock is often sold by companies

Which one of the following statements is NOT true?

A poison pill will raise the potential for maximizing shareholder value because it deters takeover bids.

Which of the following best represents a benefit of a rights offering?

Which would NOT be considered an ADR stock in the U.S.?

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

Participating preferred stock is advantageous to common stockholders.

To the individual recipient, preferred stock dividends offer no advantage over common stock dividends.

Tricki Corp stock sells for $45 rights-on, and the subscription price is $35. Ten rights are required to purchase one share. Tomorrow the stock of Tricki will go ex-rights. What is the price of Tricki expected to be when it begins trading ex-rights?

American Depository Receipts (ADRs) are certificates that give foreign stockholders a legal claim on U.S. companies' foreign stock.

The current market value of Markowitz Corp stock is $61. If 10 rights are required to buy one additional share of Markowitz at the subscription price of $50, then the rights are worth $1.00. Based on Formula 17-3: (61 - 50)/(10 + 1) = $1

The Goals and Activities of Financial Management

Review of Accounting

Financial Analysis

Financial Forecasting

Operating and Financial Leverage

Working Capital and the Financing Decision

Current Asset Management

Sources of Short-Term Financing

The Time Value of Money

Valuation and Rates of Return

Cost of Capital

The Capital Budgeting Decision

Risk and Capital Budgeting

Capital Markets

Investment Banking: Public and Private Placement

Long-Term Debt and Lease Financing

Dividend Policy and Retained Earnings

Convertibles, Warrants and Derivatives

External Growth Through Mergers

International Financial Management

Filters