Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN: 9781337395083
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
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Textbook Question
Chapter 10, Problem 5Q
How is it possible for an employee stock option to be valuable even if the firm’s stock price fails to meet shareholders’ expectations?
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How is it possible for an employee stock option to be valuable even if the firm’s stock price fails to meet shareholders’ expectations?
Why might a rational investor invest in the stock of a company that pays no dividend?
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.
Chapter 10 Solutions
Intermediate Financial Management (MindTap Course List)
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- 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?arrow_forwarda controller argues that when a company issues stock for less than current value, the value of preexinting stockholders shares is diluted. Is this allowed and right at employee compensation ?arrow_forwardWhat is the difference between a stock’s price and its intrinsic value? Why do investors and managers need to understand how to estimate a firm’s intrinsic value?arrow_forward
- How do you determine if a stock is over-valued? What does that mean? If a willing buyer and a willing seller agree to buy/sell a share of stock, who can say if the share is over-valued? What are some of the traditional tools to determine if a stock is over-valued or under-valued?arrow_forwardWhat is the advantage and disadvantage of paying your employees stock option?arrow_forwardWhich 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.arrow_forward
- 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 Neitherarrow_forwardWhich 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…arrow_forwardWhy 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 abovearrow_forward
- There will likely be a difference between your calculation of the Company’s intrinsic value and its actual stock price. If there is a difference, what are the likely determinants of that difference? I am wondering what usually is the difference of company's intrisic value and actual stock price, or what I could look for. Also, if what are usually the determinants of a difference?arrow_forwardWhy is a dissenting stockholder who demands payment of his shares no longer allowed to withdraw from his decision?arrow_forward
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