Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
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Question
Chapter 12, Problem 1PS
Summary Introduction
To discuss: Whether the given statements are true or false.
Expert Solution & Answer
Explanation of Solution
The false option is as follows:
Stock options offer managers the right (but not the obligation) to purchase their firm’s shares in the upcoming at a fixed price.
Hence, options (c) is false.
The true options is as follows:
The CEO from country U are paid much more than other countries CEOs.
Hence, options (a) is true.
The majority of the compensation fraction for country U’s CEOs arises from stock option grants.
Hence, options (b) is true.
Recently, country U’s accounting rules needs value of stock option grants as a recognition of compensation expense.
Hence, options (d) is true.
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Students have asked these similar questions
Amy Tanner is an analyst for a US pension fund. Her supervisor has asked her to value
the stocks of General Electric (GE) and General Motors (GM) Tanner wants to evaluate
the appropriateness of the dividend discount model (DDM) for valuing GE and GM and
has compiled the following data for the two companies from 211 to 2018.
GE
GM
EPS ($)
DPS ($) pay-out EPS ($)
Ratio
DPS ($)
Year
рay-out
Ratio
2018
2.17
1.15
0.53
-68.45
1.00
-0.01
2017
1.99
1.03
0.52
-3.5
1.00
-0.29
2016
1.76
0.91
0.52
-18.5
2.00
-0.11
2015
1.61
0.82
0.51
4.94
2.00
0.40
2014
1.55
0.77
0.50
5.03
2.00
0.40
2013
1.51
0.73
0.48
3.35
2.00
0.60
2012
1.41
0.66
0.47
1.77
2.00
1.13
2011
1.27
0.57
0.45
6.68
2.00
0.30
For each of the stocks, do a critical analysis and suggest whether the DDM is appropriate
for valuing the stocks.
Which is CORRECT?
O Agency costs rise with the increases in the employee ownerships of that fırm
O A takeover firm usually offers a higher price than the intrinsic value of the target firm
O A higher tax rate increases the cost of corporate borrowing
Terminal value is the present value at the terminal year of cash flows beyond the last year
of forecasting
Which of the following can be classified under Business Finance?
Select one:
a.
Australian government reducing individual tax thresholds
b.
George's decision to purchase 20 000 units of Afterpay for himself
c.
Qantas' capital raising following COVID lockdowns
d.
Jerome Powell and the Fed applying quantitative easing to buy government bonds to support businesses
Chapter 12 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 12 - Prob. 1PSCh. 12 - Terminology Define the following: a. Agency costs...Ch. 12 - Prob. 3PSCh. 12 - EVA Here are several questions about economic...Ch. 12 - Accounting measures of performance The Modern...Ch. 12 - Economic income Fill in the blanks: A projects...Ch. 12 - Prob. 7PSCh. 12 - Prob. 8PSCh. 12 - Prob. 9PSCh. 12 - Prob. 10PS
Ch. 12 - Management compensation We noted that management...Ch. 12 - Prob. 12PSCh. 12 - Prob. 13PSCh. 12 - Prob. 14PSCh. 12 - EVA Herbal Resources is a small but profitable...Ch. 12 - Prob. 16PSCh. 12 - Economic income Consider the following project:...Ch. 12 - EVA Use the Beyond the Page feature to access the...Ch. 12 - Accounting measures of performance Use the Beyond...Ch. 12 - EVA Ohio Building Products (OBP) is considering...
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