Which of the following statements is CORRECT? A) The preemptive right gives stockholders the right to approve or disapprove of a merger between their company and some other company. B) The preemptive right is a provision in the corporate charter that gives common stockholders the right to purchase (on a pro rata basis) new issues of the firm's common stock. C) The stock valuation model, P₀ = D₁/(r_s − g), cannot be used for firms that have negative growth rates. D) The stock valuation model, P₀ = D₁/(r_s − g), can be used only for firms whose growth rates exceed their required returns. E) If a company has two classes of common stock, Class A and Class B, the stocks may pay different dividends, but under all state charters the two classes must have the same voting rights.

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The preemptive right is a provision that gives existing common stockholders the right to purchase new shares of common stock on a pro rata basis before they are offered to the general public. Option A describes the right of appraisal, and options C, D, and E are incorrect statements.

Which of the Following Statements Is CORRECT