Principles of Corporate Finance
13th Edition
ISBN: 9781260465099
Author: BREALEY, Richard
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Textbook Question
Chapter 15, Problem 17PS
Underpricing Construct a simple example to show the following:
- a. Existing shareholders are made worse off when a company makes a cash offer of new stock below the market price.
- b. Existing shareholders are not made worse off when a company makes a rights issue of new stock below the market price even if the new stockholders do not wish to take up their rights.
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Which of the following is an advantage of a restricted-stock plan?
A.The stock never becomes completely worthless.
B.The plan creates new job opportunities in a company.
C.The issuance of the stock increases the profit of a company.
D.The creation of the plan increases the market price of the stock.
Why might a company repurchase its own stock?
A) It believes that the market undervalues its shares
B) To offset dilutive effects of employee stock options granted
C) To recognize an economic gain when the treasury shares are later sold for a profit
D) To improve earnings per share by reducing the denominator
E) All of the above
is it just A and B or is it all of the above
Which one of the following statements about dividend policies is FALSE?
a. One advantage of dividend reinvestment plans is that they allow shareholders to maintain a position in a company with minimal trading.
b. One key disadvantage of a residual dividend policy is that it makes it hard for a company to follow a stable dividend policy.
c. The clientele effect suggests that brokerage companies should choose customers whose dividend preferences match those of their client service borkers.
d. The "bird-in-the-hand effect" is the argument that investors prefer dividends to capital gains because dividends are more certain than capital gains.
e. In today's tax environment, gains through stock repurchases and dividend payments are taxed at the same rate
Chapter 15 Solutions
Principles of Corporate Finance
Ch. 15 - Vocabulary Each of the following terms is...Ch. 15 - Prob. 2PSCh. 15 - Vocabulary Here is a further vocabulary quiz....Ch. 15 - Stock issues True or false? a. Venture capitalists...Ch. 15 - Prob. 5PSCh. 15 - Prob. 6PSCh. 15 - Prob. 7PSCh. 15 - Venture capital Complete the passage using the...Ch. 15 - Venture capital a. A signal is credible only if it...Ch. 15 - IPOs Refer to Section 15.1 and the Marvin...
Ch. 15 - Prob. 11PSCh. 15 - Prob. 12PSCh. 15 - Issue costs In April 2019. Van Dyck Exponents...Ch. 15 - Underpricing In same U.K. IPOs, any investor may...Ch. 15 - Prob. 15PSCh. 15 - Prob. 16PSCh. 15 - Underpricing Construct a simple example to show...Ch. 15 - Prob. 18PSCh. 15 - Prob. 19PSCh. 15 - Costs of a general cash offer Why are the costs of...Ch. 15 - Prob. 21PSCh. 15 - Prob. 22PSCh. 15 - Rights issues In 2012, the Pandora Box Company...Ch. 15 - Prob. 24PSCh. 15 - Rights issues vs. cash offers Suppose that instead...Ch. 15 - Private placements You need to choose between...Ch. 15 - Prob. 27PSCh. 15 - Prob. 28PSCh. 15 - Dilution Here is recent financial data on Pisa...
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