Question: What is callable preferred stock? Answer: A type of preferred stock that gives a corporation the right to call in the stock at a certain price and to retire the stock. Callable preferred stock is one of many types of preferred stock. Instead of having a maturity date, it can be bought back by the issuing company for a certain price on a certain date. Question: Why do corporations issue such stock? Answer: Issuing callable stock offers the company protection against future interest
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common stock. Proxy fight- An attempt by a person or group to gain control of a firm by getting its stockholders to grant that person or group the authority to vote its shares to replace the current management Takeover- An action whereby a person or group succeeds in ousting a firms management and taking control of the company. Preemptive Right- A provision in the corporate charter or bylaws that gives common stockholders the right to purchase on a pro rata basis new issues of common stock Classified
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in 1972 and the additional common stock offering in 1975, from 1978 the company accelerated the financing activities due to the larger capex required, namely, 1) Convertible preferred stock in 1978, 1979 and 1980 at the cost of 10.5~12.3% 2) Subordinated debentures in 1980, 1981 and 1982 at the cost of 15.0~16.8% 3) Convertible subordinated debenture in 1981, 1982 and 1983 at the cost of 7.8~10.3% Convertible preferred stock: The company issued preferred stock of $25.8 million in 1975 and $ 63
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30 percent. b. A preferred stock paying a 9 percent dividend on a Rs 100 par value. If a new issue is offered, flotation costs will be 5 percent of the current price of Rs 125. c. Internal common equity where the current market price of the common stock is Rs 60 The expected dividend for coming year should be Rs 6, increasing thereafter at a 8 percent annual growth rate. The corporation's tax rate is 30 percent. d. A new common stock issue that paid a Rs 12 dividend
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Chapter 11 The Cost of Capital Sources of Capital Component Costs WACC Adjusting for Flotation Costs Adjusting for Risk 11-1 What sources of long-term capital do firms use? Long-Term Capital Long-Term Debt Preferred Stock Common Stock Retained Earnings New Common Stock 11-2 Calculating the Weighted Average Cost of Capital WACC = wdrd(1 – T) + wprp + wcrs The w’s refer to the firm’s capital structure weights. The r’s refer to the cost of each component. 11-3 Should our analysis
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10,000 shares of 6%, $10 par value cumulative preferred stock it had outstanding for the year. The weighted average number of common shares outstanding and net income for the year were 50,000 shares and $90,000, respectively. Earnings per share equals (do not show your work; just enter your answer): Question 3 Oceanview Wholesale Merchandise had 20,000 shares of 6%, $20 par value preferred stock and 15,000 shares of $25 par value common stock outstanding throughout 2014. Assuming that total
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annual dividend payments, what is the current market value of a share of RHM stock if the required return on RHM common stock is 10%? Current market value = D1/(Required return – growth rate) = 5.60/(10%-6%) = $140 A12. (Required return for a preferred stock) James River $3.38 preferred is selling for $45.25. The preferred dividends is now growing. What is the required return on James River preferred stock? Required Return = Dividend/Market Price Dividend = $3.38
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97% (32 out of 33 correct) Responses to questions are indicated by the symbol. 1. The stockholders of a corporation have unlimited liability. A. True B. False Correct! The liability of a stockholder is normally limited to their investment in the corporation. 2. Which of these is not a major advantage of a corporation? A. Separate legal existence B. Continuous life C. Government regulations D. Transferable ownership rights Correct Government regulations
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Cox items for discussion 1. Why is Cox acquiring Gannett? Does it make sense at 2.7 billion. 2. Assuming the Gannett acquisition goes through, estimate CCI’s (1 ½ years) and long term (4 ½ years) funding needs. How much of each funding need must be met through external financing? 3. What constraints do they face in satisfying CCI’s funding needs? Assume a 65% floor on CCIs economic stake” 4. Analyze the proposed solutions. What is a Felines Prides security? What are the advantages/disadvantages
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Identify and discuss the major characteristics of a corporation. Understand the Components of Stockholders’ Equity. Record the issuance of common stock. Explain the accounting for the purchase of treasury stock. Differentiate preferred stock from common stock. Prepare the entries for cash dividends and understand the effect of stock dividends and stock splits. Identify the items that affect retained earnings. Prepare a comprehensive stockholders' equity section. Evaluate a corporation's dividend
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