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- Dual class stock is generally designed to Provide bigger dividends to majority owners. Help minority owners obtain board representation. Protect the voting rights of managing owners. Improve marketability of the shares. A shareholder in a troubled corporation is not likely to lose his/her: Money invested in the stock. Personal assets. Dividends declared. Par value. 3. An order to the New York Stock Exchange to buy or sell at the best price available is called: - A limit order - A stop order - a market order - a GTC orderThe rationale behind granting stock options is toinduce employees to work harder and be moreproductive. As the stock price increases (presumably due to their hard work), the employees sharein this added wealth. Another way to share thiswealth would be to grant shares of stock ratherthan options. What are the advantages anddisadvantages of using stock options rather thanshares of stock as employee incentives?In a world without taxes or transaction costs, it can be argued that dividend policy is irrelevant for shareholder value and cash flow. With a no-dividend policy, the current price is and will remain $100.00 per share. With a high-dividend policy, the current price is $100.00 per share and the value falls to $95 per share upon payment of the dividend. Use the following example to demonstrate dividend policy irrelevance. No-dividend Policy High-dividend Policy 5,000 shares owned 5,000 shares owned $100.00 current price per share $100.00 current price per share $0.00 dividends per share $5.00 dividends per share $25,000 desired cash flow per year $25,000 desired cash flow per year
- The directors of Company XYZ wishes to make a big investment into a new project which will be financed by means of a rights issue. The directors expect the share price will decrease to values even lower than the theoretical ex-rights price. Explain the factors that would influence the share price after the rights issue.Question III: In the following, suppose that neither stock pays a dividend. (a) Suppose you have a call option that permits you to receive one share of Apple by giving up one share of AOL. In what circumstance might you early-exercise this call? (b) Suppose you have a put option that permits you to give up one share of Apple, receiving one share of AOL. In what circumstance might you early-exercise this put? Would there be a loss from not early-exercising if Apple had a zero stock price? (c) Now suppose that Apple is expected to pay a dividend. Which of the above answers will change? Why?In a few sentences, answer the following question as completely as you can. You are discussing stock valuation techniques with your broker. You mention that your Finance professor stated that “a stock that will never pay a dividend is valueless.” Your broker says this is not true because you can always sell the stock to someone else (thus, a capital gain is possible) a share of stock represents a share of ownership in something tangible (i.e., the issuing firm).Argue for or against your broker’s position.
- What are disadvantages for a company to go public by issuing equity in an initial public offering (IPO)? Question 16 options: a) It reduces information asymmetry for competitors b) Class action lawsuits can occur following large stock price drops c) It can attract analyst following resulting in myopic decisions d) All of the above are disadvantages of an IPO e) None of the above are disadvantages of an IPOhigh quality firms low quality firms 50 75 100 higher lowerYou are the CFO of a profitable firm that is financially constrained. The stock market is currently going through a boom phase (assume this is a bubble). From what you have learned in this course, you know that the rational decision would be to issue new shares and use this income to pursue positive NPV projects. Before you make this decision, what is the most important variable that you would examine Assume you have information on all these variables. Select one: O a. Market Q O b. Fundamental Q O c. Elasticity of price demand for common shares O d. Cash Savings
- Reasons for issuing Preferred Stock includea. To raise funds without giving up controlb. To boost the return for commonshareholdersc. To reduce stock dividends/splitsd. All of the abovee. None of the abovef. Only a aboveg. Only b aboveh. Only a and b above Explain why...Net working capital is the capital required in the short term to run the business, thertore, there are no opportunity costs associated with investing in it. Select one: O True FalseYou work as the CEO of StarBright Berhad, and the company is facing the threat of a buyout by StarZip Berhad. Your company stock price is currently trading at RM1.80. StarZip Berhad announced its interest in buying StarBright Berhad with the offer price of RM2.40. Your management is unhappy with the offer price and is against the takeover. With the full support from your management, you are fighting to prevent the takeover by StarZip Berhad. Are you acting in the best interest of the shareholders? Explain.