Question 1

If SED's shares trade ex-rights at $51.75, carry a subscription price of $48 a share, and can be purchase by shareholders in a ratio of 5 rights per share, SED's rights trade at ______.

Accepted Answer

The answer of If SED's shares trade ex-rights at $51.75,...

Question 2

SED Corporation's shares are currently trading at $52.50. Shareholders have the right to buy 1 share of SED for every 5 rights they own at a price of $48.00. SED's rights trade at $_________?

Accepted Answer

The answer of SED Corporation's shares are currently trading at...

Question 3

American Depositary Receipts (ADRs) are:

Accepted Answer

The answer of American Depositary Receipts (ADRs) are:
...

Question 4

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?

Accepted Answer

The answer of Davis Aquatic Corp. has 300,000 shares of...

Question 5

A "poison pill":

Accepted Answer

A poison pill is a defensive mechanism adopted by companies to avoid being taken over by another company. It usually involves the issuance of new shares to the existing shareholders, which dilutes the shares held by the acquiring company, making the takeover more difficult and expensive. While a poison pill protects current shareholders from a hostile takeover, it may not maximize shareholder value in the long term by deterring potential high takeover bids. Therefore, option B is the correct choice.

Question 6

Advantages that the American Depositary Receipts (ADRs) have over investing in actual shares of a foreign stock include all but the following;

Accepted Answer

The statement "Have annual reports and financial statements presented in French, Spanish and Mandarin" is incorrect. ADRs have financial statements presented in a US GAAP or IFRS format, not in foreign languages. Thus, option D is the only wrong statement.

Question 7

American Depositary Receipts:

Accepted Answer

American Depositary Receipts (ADRs) have annual reports and financial statements presented in English to make them more accessible to American investors.

Question 8

American Depositary Receipts:

Accepted Answer

American Depositary Receipts (ADRs) are a way for American investors to invest in foreign companies without having to directly purchase the foreign stock. ADRs typically have annual reports and pay dividends in US dollars. They are generally considered more liquid and less expensive to buy than foreign stock.

Question 9

Given that there are 6,000,000 shares outstanding in a corporation, how many additional shares will be required for a minority group of shareholders to elect 4 of the 14 members on the board of directors? (Assume cumulative voting required. Assume the group already owns 400,000 shares.)

Accepted Answer

The answer of Given that there are 6,000,000 shares outstanding...

Question 10

A firm has 200,000 outstanding shares and 11 directors. Doug owns 15,500 shares of this firm. How many directors can Doug elect with cumulative voting?

Accepted Answer

The answer of A firm has 200,000 outstanding shares and...

Question 11

Which of the following are benefits of a rights offering?

Accepted Answer

Rights offerings are an efficient way for a company to raise capital by allowing existing shareholders to purchase additional shares at a discounted price. This can help the company avoid costly debt financing or dilution of ownership. Therefore, D is the correct answer. A is incorrect because it may or may not increase return on equity depending on the use of the raised capital. B is incorrect because it contradicts the purpose of a rights offering by indicating a higher reliance on debt financing. C is incorrect because a rights offering typically does not decrease earnings per share.

Question 12

Corporation A is issuing preferred stock yielding 9%, and Corporation B is considering buying the stock. Corp A's tax rate is 23% and Corp B's tax rate is 39%. What is the aftertax preferred yield for Corp A?

Accepted Answer

The answer of Corporation A is issuing preferred stock yielding...

Question 13

Preferred stock is often sold by companies:

Accepted Answer

Preferred stock is often sold by companies to expand the capital base without incurring contractual debt obligation. Unlike bonds, preferred stock does not involve a promise to repay a fixed amount of money by a certain date. Instead, companies issue preferred stock to raise capital while retaining more ownership control than if they were to sell common stock. Additionally, preferred stock often offers investors a higher dividend payout than common stock, which can help attract investors. Therefore, option A is the best choice.

Question 14

Which of the following statements is true with respect to cumulative voting?

Accepted Answer

Cumulative voting allows shareholders to cast all of their votes for one candidate or spread them out among multiple candidates. In this scenario, since 6 directors are to be elected, a shareholder with 100 shares could potentially cast all 600 of their votes for one director and none for the others. Option A is incorrect because cumulative voting allows for multiple votes to be cast for multiple directors. Option B is incorrect because cumulative voting actually gives minority shareholders a better chance of being represented on the board since they can concentrate their votes on a single candidate. Option D is incorrect because cumulative voting typically allows for "multiplier" votes (i.e. a shareholder can vote for a candidate multiple times based on the number of shares they own) rather than adding one vote per share owned.

Question 15

You are a shareholder in Trees N Things (TNT) and you would like to elect 6 of the 11 members of the Board of Directors. If there are 3.5 million shares outstanding what is the minimum number of shares required to elect your slate of directors under cumulative voting?

Accepted Answer

The answer of You are a shareholder in Trees N...

Question 16

Preferred stock is the most used of all long-term securities because?

Accepted Answer

The answer of Preferred stock is the most used of...

Question 17

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

Accepted Answer

The answer of To the corporate investor, common stock offers...

Question 18

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:

Accepted Answer

The answer of Nine rights are necessary to purchase one...

Question 19

XYZ's rights currently trade at $7.60. Each right can be used to buy one share of XYZ at $27.92 based on a subscription ratio of 5 rights for each share purchased. XYZ's current cum rights share price is _______.

Accepted Answer

The answer of XYZ's rights currently trade at $7.60. Each...

Question 20

A stock sells for $50 rights-on, the subscription price is $40. Nine rights are required to purchase one share. The value of a right is:

Accepted Answer

The answer of A stock sells for $50 rights-on, the...

Quiz 17: Common and Preferred Stock Financing

If SED's shares trade ex-rights at $51.75, carry a subscription price of $48 a share, and can be purchase by shareholders in a ratio of 5 rights per share, SED's rights trade at ______.

SED Corporation's shares are currently trading at $52.50. Shareholders have the right to buy 1 share of SED for every 5 rights they own at a price of $48.00. SED's rights trade at $_________?

American Depositary Receipts (ADRs) are:

A "poison pill":

Advantages that the American Depositary Receipts (ADRs) have over investing in actual shares of a foreign stock include all but the following;

American Depositary Receipts:

American Depositary Receipts:

Given that there are 6,000,000 shares outstanding in a corporation, how many additional shares will be required for a minority group of shareholders to elect 4 of the 14 members on the board of directors? (Assume cumulative voting required. Assume the group already owns 400,000 shares.)

A firm has 200,000 outstanding shares and 11 directors. Doug owns 15,500 shares of this firm. How many directors can Doug elect with cumulative voting?

Which of the following are benefits of a rights offering?

Corporation A is issuing preferred stock yielding 9%, and Corporation B is considering buying the stock. Corp A's tax rate is 23% and Corp B's tax rate is 39%. What is the aftertax preferred yield for Corp A?

Preferred stock is often sold by companies:

Which of the following statements is true with respect to cumulative voting?

You are a shareholder in Trees N Things (TNT) and you would like to elect 6 of the 11 members of the Board of Directors. If there are 3.5 million shares outstanding what is the minimum number of shares required to elect your slate of directors under cumulative voting?

Preferred stock is the most used of all long-term securities because?

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

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:

XYZ's rights currently trade at $7.60. Each right can be used to buy one share of XYZ at $27.92 based on a subscription ratio of 5 rights for each share purchased. XYZ's current cum rights share price is _______.

A stock sells for $50 rights-on, the subscription price is $40. Nine rights are required to purchase one share. The value of a right is: