PRIN.OF CORPORATE FINANCE >BI<
12th Edition
ISBN: 9781260431230
Author: BREALEY
Publisher: MCG CUSTOM
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Chapter 33, Problem 7PS
Summary Introduction
To explain: The way a shareholder might gain control of Company Z.
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Chapter 33 Solutions
PRIN.OF CORPORATE FINANCE >BI<
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- Using Problem 1, in case RED Corporation is liquidated, how much would be the total amount to be received by an investor who holds 2,000 ordinary shares and 1,000 preference shares? *arrow_forwardAs a shareholder, preemptive rights are important because it Select one: a. results in higher dividends per share. b. is included in every corporate charter. c. allows managers to buy additional shares below the current market price. d. protects bondholders and thus enables the firm to issue debt with relatively low interest rates e. protects current shareholders against a dilution of ownership interests. You recently sold 100 shares of Pfizer stock, and the transfer was made through a broker. This is an example of: Select one: a. A secondary market transaction. b. A primary market transaction. c. A money market transaction. d. A futures market transaction. e. An over-the-counter market transaction. Which of the following statements is CORRECT? Select one: a. If a coupon bond is selling at par, its current yield equals its yield to maturity. b. If rates fall after its issue, a zero-coupon bond could trade at a price above its maturity (or par) value. c. If rates fall rapidly, a…arrow_forwardIndicate whether the following statements are true or false. If the statement is false, explainwhy.a. If a firm repurchases its stock in the open market, the shareholders who tender thestock are subject to capital gains taxes.b. If you own 100 shares in a company’s stock and the company’s stock splits two-forone,you will own 200 shares in the company following the split.c. Some dividend reinvestment plans increase the amount of equity capital available tothe firm.d. The Tax Code encourages companies to pay a large percentage of their net income inthe form of dividends.e. If your company has established a clientele of investors who prefer large dividends,the company is unlikely to adopt a residual dividend policy.f. If a firm follows a residual dividend policy, holding all else constant, its dividendpayout will tend to rise whenever the firm’s investment opportunities improve.arrow_forward
- Indicate whether the following statements are true or false. If the statementis false, explain why.b. If you own 100 shares in a company’s stock and the company’s stocksplits 2-for-1, then you will own 200 shares in the company followingthe split.arrow_forwardTypes of common stock In some cases, individuals who start a business have special voting rights that help them exercise more control over the firm. They own a special class of stock called (dual, founder) shares. Consider this case: The CEO of EchoStar Communications, Charlie Ergen, owned around 5% of the company’s stock, but his multiple votes per share gave him around 90% of the vote. Source: “Dish Network 2010 Annual Report,” on Dish Network Investor Relations, http://files.shareholder.com/downloads/DISH/1330128565x0x480914/DC45515A-D65F-475D-B6C2-CF83AE7A10D6/DISH_-_Web_Posting_-_3.30.11.pdf. Based on this example, which of the following statements is true? A. Classified shares are not issued with the purpose of providing super voting rights to a certain class of investors. B. Classified shares have super voting rights, which give more control to a certain class of investors.arrow_forwardA corporation declares a 15% stock distribution. The shareholders have a choice between the stock or $150 in cash per each share. The fair market value (FMV) of the stock is $160 per share. Shareholder A owns 600 shares and has a basis in the stock of $33,000. Shareholder B owns 400 shares and has a basis in the stock of $36,000. The corporation has $30,000 of earnings and profits (E&P). What is the character of the distribution? A. $13,500 capital gains B. $13,500 dividend income C. $14,400 capital gains D. $14,400 dividend incomearrow_forward
- Corporation Dividend Examples - Situation 1: Assume a company has 100,000 shares of common stock with a $1 par value outstanding when it declares a 2 for 1 stock split. After the split, how many shares are outstanding and what is the par value? Situation 2: Assume a company has 100,000 shares of common stock with a $1 par value outstanding when it declares a 1 for 4 reverse stock split. After the split, how many shares are outstanding and what is the par value? Situation 3: Assume that the Board of Directors of ABC Corporation meets on April 1 and declares a dividend of $500,000 payable on June 1 to stockholders of record on May 1. ABC Company currently has 100,000 shares of common stock and 20,000 shares of $100 par, 8% preferred stock outstanding. What happens on each date and how large is the dividend for each class of stock? Situation 4: Now assume dividends are 2 years in arrears for the information listed above. What is the dividend for common stockholders?arrow_forwardWhich of the following statements is true? The outstanding number of shares is the maximum number of shares that can be issued by a corporation. The shares that are in the hands of the stockholders are said to be outstanding. It is very unlikely that corporations will have more than one class of stock outstanding. Preferred stock is stock that has been retired.arrow_forward
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