Exam 14: Introduction to Corporate Financing and Governance

Ray's Jams Inc.was just established with an investment of $5 million into stereo equipment.Ray expects his company to generate $800,000 a year for the next 200 years.If Ray's cost of capital is 15%, find the market value and book value of his company.(Use values in millions)

To state that net equity issues have been negative recently in the North America indicates that:

A shareholder owning 100 shares of stock is voting for the board of directors who are elected by cumulative voting.How many votes did the shareholder cast for Director 'A' if four directors are to be elected and the maximum number of votes was cast for 'A'?

Eurobonds are long-term, corporate liabilities that:

Which of the following statements about floating-rate preferred stock is correct?

Which of the following statements is correct about a corporation that borrows from its bank at "Prime plus one %?" The interest rate:

What is the net value of common equity for a firm with 3 million shares issued, 1 million shares outstanding, $4 million of retained earnings, $2 million of treasury stock at cost, $1 million in additional paid-in capital, and a $1 par value per share?

The benchmark interest rate that banks charge to their best customers is termed:

Disregarding issues of risk and return, why might it be important to shareholders and management alike as to what class of equity is issued (e.g., common, preferred, etc.)?

When new shares are sold at a price greater than par value, the excess over par is recorded as:

Corporations are less likely to repurchase callable bonds when market interest rates have risen.

The majority of an established firm's capital is generated:

A capital surplus is obtained when the par value of a stock is greater than the retained earnings.

What will be the effect on retained earnings if a firm with 5,000 shares outstanding earns $10 per share and has a 30% plowback ratio? It will increase by:

In what ways is preferred stock like long-term debt? In what ways is it like common stock?

Which of the following forms of debt would be likely to offer debt holders the lowest interest rate?

List four protective covenants that you might be interested in as a prospective bondholder.Briefly describe why these would be realistic bondholder concerns.Note: the text did not list four covenants, so you must be creative.

A corporation cannot default on debt that is funded.

Which of the following equity concepts would you expect to be least important to a financial analyst?

If a corporation uses cumulative voting, then ______ of a shareholder's vote's _____ be cast for one candidate.