on bonds‚ like dividends on preferred stock‚ may be deferred until a later date at the discretion of management‚ making debt financing more appealing to corporate managers. Answer True False 1 points Question 5 Restrictive provisions in bond indenture agreements are designed to protect bondholders and lessen the agency problems between bondholders and stockholders. Answer True False 1 points Question 6 A company with a AAA bond rating will command a
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29) All of the following features may be characteristic of preferred stock EXCEPT A) callable. B) no maturity date. C) tax-deductible dividends. D) convertible. Answer: c If a firm has class A and class B common stock outstanding‚ it means that A) each class receives a different dividend. B) the par value of each class is different. C) the dividend paid to one of the classes is tax deductible by the corporation
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charges. As a result‚ firms in unstable industries tend to use less debt than those whose sales are subject to only moderate fluctuations. 12-4 The tax benefits from debt increase linearly‚ which causes a continuous increase in the firm’s value and stock price. However‚ bankruptcy-related costs begin to be felt after some amount of debt has been employed‚ and these costs offset the benefits of debt. See Figure 12-5 in the textbook. 12-5 Carson does have leverage because its EPS increases by a greater
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combination of two or more companies into one‚ wherein the merging entities lose their identities. No fresh investment is made through this process. Howeverof shares takes place between the entities involved in such a process. Generally‚ the company that survives is the buyer which retains its identity and the seller company is extinguished. A merger can also be defined as an amalgamation if all assets and liabilities of one company are transferred to the transferee company in consideration of payment
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price—of a stock depends on the volatility of the stock market in general. For example‚ consider the following variables pertaining to Amazon stock: AMZN = the fractional change in the price of Amazon stock on a day‚ MKT = the fractional change in the market on that same day. The data file Amazon.xls contains 503 historical values of these two variables; thus‚ for example‚ the first value of 0.005193 for AMZN and −0.01003 for MKT means that‚ on that particular day‚ the price of Amazon stock increased
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Aspin Corporation’s charter authorizes issuance of 2‚000‚000 shares of common stock. Currently‚ 1‚400‚000 shares are outstanding‚ and 100‚000 shares are being held as treasury stock. The firm wishes to raise $48‚000‚000 for a plant expansion. Discussions with its investment bankers indicate that the sale of new common stock will net the firm $60 per share. a. What is the maximum number of new shares of common stock that the firm can sell without receiving further authorization from shareholders
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The Features of a Joint Stock Company When it comes to a joint stock company‚ one among the various types of business organizations which are instrumental towards the economic development in any country‚ the following are the various features: 1. Voluntary organization: A joint stock company is a voluntary organization or association of shareholders; 2. Legal person: It is a legal or an artificial person as a result of law. It has no physical existence; however‚ it functions as a separate
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Company Stock Project Write-Up Southwest is one of the most growing domestic airlines along with JetBlue Airways and United Airlines. Southwest airline was first established in Texas in 1967. In the start of its business‚ southwest focused only in the Southwest region (that’s where the name came from). With 45 years of service‚ Southwest expands its company to the whole country with more than 3‚400 flights each day. Southwest currently has a total capital of 10‚991 million dollars. In 2011
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term loan means the duration of maturity is of one year or less than that. We need to be clear that equity instrument i.e common or preferred stocks both are not traded in money market. Similarly‚ we need to keep one thing in mind that money market is a intangible market where we deal over the phone or company‚ we just don’t enter the building of a company. Likewise‚ Capital market refers to the process in which all the financial institutions deals in long term debt in different forms such as debentures
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Value Stock vs. Growth Stock September 14‚ 2013 Growth and value are styles of investing in stocks (Emerald‚ 2013). Analysts commonly classify companies with low market-to-book ratios as value stocks‚ and firms with high market-to-book ratios as growth stocks (Berk & DeMarzo‚ 2011). Neither approach is certain to give appreciation in stock market value; both carry the possibility of risk. The return
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