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
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Which of the following is an advantage of a restricted-stock plan?
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- 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 aboveA company might purchase treasury stock for all of the following reasons excepta. it wants to increase its net assets by buying its stock low and reselling it at a higher price.b. management wants to decrease the earnings per share of common stock.c. management wants to avoid a takeover by an outside party.d. the company needs the stock to distribute to employees as part of its employee stockpurchase plans.Which of the following would not be an appropriate reason for a firm to repurchase its stock: As an investment if management believes the market has undervalued the stock price. In order to have sufficient shares to cover employee stock programs. Solely to boost Earnings Per Share. Both A and B.
- Which of the following statements concerning common stock and the investment banking process is NOT CORRECT? a. The preemptive right gives each existing common stockholder the right to purchase his or her proportionate share of a new stock issue. b. The announcement of a large issue of new stock could cause the stock price to fall. This loss is called "market pressure," and it is treated as a flotation cost because it is a cost to stockholders that is associated with the new issue. c. If a firm sells 1,000,000 new shares of Class B stock, the transaction occurs in the primary market. d. Listing a large firm's stock is often considered to be beneficial to stockholders because the increases in liquidity and reputation probably outweigh the additional costs to the firm. e. Stockholders have the right to elect the firm's directors, who in turn select the officers who manage the business. If stockholders are dissatisfied with…What is the value of Ls stock for volatilities between 0.20 and 0.95? What incentives might the manager of L have if she understands this relationship? What might debtholders do in response?Why is the cost of retained earnings cheaper than the cost of issuing new common stock? Group of answer choices Issuing new common stock may send a negative signal to the capital markets, which may depress the stock price. When a company issues new common stock they also have to pay flotation costs to the underwriter. Either Neither
- The company must issue a new stock if the market value is less than intrinsic value, otherwise there is no need for a stock issuance. Select one: O True O False Next pag*which of the following statements is true? Select one: O Investors sell a stock when required return is less than expected return and buy a stock when required return above expected return O Investors sell a stock when it is under-valued and buy it when it is over-valued. O Investors buy a stock when it is under-valued and sell it when it is over-valued None of the answers are correctАВС XYZ Discount rate (r) Historical growth rate of 0.015+2*0.085=0.185 0.015+1.5*0.085=0.142 (58/30)^(1/30)-1=0.022 Not available. Cannot dividends compute without dividends Sustainable growth rate Fundamental value using dividend growth model with the historical growth rate Fundamental value using the 467*(1+0.185)/(0.185-0.045) dividend growth model with =3953 the sustainable growth rate Fundamental value using residual income growth 0.15*(1-0.7)=0.045 467*(1+0.185)/(0.185-0.022) 0.2*(1-0)=0.2 Not available. Cannot =3395 compute without dividends Not available. Cannot compute without dividends 80*(1+0.022)-(550*0.022)/(0. 185-0.022)=427.36 Not available. Cannot compute without dividends model with the historical growth rate Fundamental value using the 80*(1+0.045)-(550*0.045)/(0. residual income growth 12*(1+0.2)-(100*0.2)/(0.142- 0.2)=96.5 185-0.045)=420.35 model with the sustainable growth rate
- Explain the effect of D/E on asset returns, equity returns (assuming that cost of debt is not affected), asset beta and equity beta (assuming that debt beta is zero). Should an investor choose to invest in a stock of a company with high or low D/E, or why expected returns on these stocks are equivalent, although they are not equal?Companies are more apt to choose repurchases over dividends if doing so will enable them to I. take advantage of a market undervaluation of their shares. II. maintain or increase the value of executive stock options. III. offset the dilution created by the exercise of executive stock options. IV. distribute revenue increases that are considered temporary or short-term in nature.Which of the following statement(s) is(are) TRUE? (i) The valuation price of a stock primarily depends on expected future dividends to its shareholders and its required rate of return. (ii) An investor who intends to sell a stock after holding it for a short period will forgo all future dividends, thus will be willing to pay for a lower price for the stock compared to another investor who prefers to hold the share for a longer period. (iii) The valuation share price is positively related to the share's required rate of return.