Quiz 4 business finance
A certain preferred stock will pay a dividend of $1.20 per share till perpetuity. If the required return is 10 percent, the value of the preferred stock is ________.
$12
Treasury stock refers to the ________.
repurchase of outstanding stock
In a ________, new shares are sold to the existing shareholders.
rights offering
If bankruptcy were to occur, ________ would have the first claim on assets.
secured creditors
A proxy statement is a statement transferring ________.
the votes of a stockholder to another party
Typically, the yield curve is ____
upward sloping as the maturity increases
Holders of equity capital ________.
own the firm
Which of the following capital budgeting techniques ignores the time value of money?
payback period approach
Which of the following is TRUE of par value of a common stock?
It is an arbitrary value established for legal purposes in a firm's corporate charter.
Which of the following statements regarding a zero-coupon bond is NOT correct?
It is usually sold at a premium par
Which of the following statements about the price multiples approach to stock valuation is incorrect?
Price multiples tend to remain stable over time
Which of the following is likely specified in the standard provisions of a bond issue?
Record-keeping and general business practices that the issuer must follow
Thinking in terms of the goal of wealth maximization, a project breaks even for shareholders, meaning that it neither creates nor destroys value, if ________.
its NPV equals 0
Projects that compete with one another, so that the acceptance of one eliminates the others from further consideration are called _______
mutually exclusive projects
Projects that compete with one another, so that the acceptance of one eliminates the others from further consideration are called ________.
mutually exclusive projects
Which of the following bonds is expected to have the highest yield?
An investment grade bond
Which of the following is correct about the call feature of a bond
It allows the issuer to redeem (buy back) the bond prior to its maturity
Which of the following is TRUE of common stock?
It gives the holder voting rights which permit selection of the firm's directors.
Which of the following stock valuation models does not reveal the intrinsic value of a stock
The price-earnings model
Which of the following typically applies to common stock but not to preferred stock?
Which of the following typically applies to common stock but not to preferred stock?
Which of the following is an example of a nonconventional pattern of cash flows?
Year 0 1 2 3 4 cash flow 200 100 dash-100 200 dash-300
Which of the following is an indexed bond
a US treasury inflation protected security
A proxy battle is the attempt by ________.
a nonmanagement group to unseat the existing management and gain control of the firm
The value of a bond is the present value of its expected
coupon payments and principal payment
Preferred stockholders ________.
do not have preference over bondholders in the case of liquidation
Shares of stock currently owned by a firm's shareholders are called ________.
outstanding shares
