Typically a corporation's board of directors would not make which one of the following decisions?
A) compensation for the president of the corporation
B) who can purchase the corporation's common stock
C) determine long-term corporate policy
D) decide whether to build a new 1 billion casino or not
The goal of wealth maximization for the owners makes sense for the firm because
A) the owners always know what is best for themselves.
B) the lenders really don't have the right to make decisions.
C) the owners will fire all the employees otherwise.
D) if we have satisfied the owners, we have satisfied all other parties as well.
Everything else being the same, the higher a firm's earnings growth, the lower the value of its common stock.
Indicate whether the statement is true or false
The three factors that determine the value of future dividends are
A) size, timing, and risk.
B) type, size, and cost.
C) size, risk, and return.
D) timing, risk, and location.
The valuation of common stock with zero growth is similar to the valuation of preferred stock.
Indicate whether the statement is true or false
If you wanted to take actions to maximize value for the owners, which of the following actions would be the most effective?
A) raising prices
B) maximizing revenue
C) cutting costs such as advertising and training
D) none of the above
Valuing common stock is less difficult and more precise than valuing bonds.
Indicate whether the statement is true or false
Which of the following makes preferred stock different from common stock?
A) Common stockholders receive dividends.
B) Common stockholders get paid after the bondholders.
C) Common stockholders can vote for the board of directors.
D) Dividends to common stockholders are tax deductible.
The costs involved with issuing common stock are much lower than the costs involved with issuing bonds and preferred stock.
Indicate whether the statement is true or false
Investors view common stock as a riskier investment than bonds or preferred stock.
Indicate whether the statement is true or false
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