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The advantages of issuing preferred stock form the common stockholder s perspective include all of the following EXCEPT

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1. The advantages of issuing preferred stock form the common stockholder s perspective include all of the following EXCEPT
a. Increased leverage
b. Flexibility
c. Use in mergers
d. Seniority of preferred stockholders over common stockholders

2. Al l of the following features may be characteristics of preferred stock EXCEPT
a. Convertibility
b. No maturity date
c. Callable
d. Tax deductible dividend

3. Preferred stockholders
a. Do have preference over bondholders in the case of liquidation
b. Do not have preference over bondholders in the case of liquidation
c. Do not have preference over common stockholders in the case of liquidation
d. Two of the above are true statements

4. The opportunity for management to purchase a certain number of shares of their firm s common stock at a specific price over a certain period of time is a
a. Stock option
b. Stock right
c. Pre emptive right
d. Warrant

5. Stock right provide the stockholder with
a. Cumulative voting privileges
b. The opportunity to receive extraordinary earnings
c. The right to elect the board of directors
d. Certain purchase privileges of additional stock shares in direct proportion based on their number of owned shares

6. Tangshan China Company s stock is currently selling for $80.00 per share. The expected dividend on year from now is 44.00 and the required return is 13%. What is the dividend growth rate assuming that dividends are expected to grow at a constant rate forever?
a. 9%
b. 10%
c. 8%
d. 11%

7. Which of the following valuations methods is superior to the others in the list since it considers expected earnings?
a. P/E multiple
b. Liquidation value
c. Book value
d. Present value of the interest

8. Nico Comp expects to generate free**cash flows of $220,000 per year for the next five years. Beyond that time, free cash flows are expected to grow at a constant rate of 5% per year forever. If the firm s average cost of capital is 15%, the market value of the firm s debt is $500,000 and Nico has a half million shares of stock outstanding, what is the value of Nico s stock?
a. $0.00
b. $1.43
c. $3.43
d. $2.43

9. A capital expenditure is all of the following except
a. An outlay for current asset expansion
b. An outlay made for the earnings assets of the firm
c. Commonly used to expand the level of operations
d. Expected to produce benefits over a period of time greater than one year

10. ________projects have the same functions; the acceptance of one________the others from consideration.
a. Mutually exclusive; eliminates
b. Replacement; does not eliminate
c. Capital; eliminates
d. Independent; does not eliminate

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