falling stock price and ROE has dropped to -200% making the risky stock unappealing so setting the premium as high as I did should influence investors. Ke= .0875+.10= .1875(or 18.75%) 3. Marginal Cost of Preferred Stock: Preferred Stock Return would be a little less, Costing us 17.75% because the preferred stock(even though this company does not have any) would be less risky because of the fact that shareholders of preferred stock would get payed before those holders of common stock.
Words: 581 - Pages: 3
#2: Suppose a company has a preferred stock issue and a common stock issue. Both have just paid a $2 dividend. Which do you think will have a higher price, a share of the preferred or a share of the common? #3: The Jackson-Timberlake Wardrobe Co. just paid a dividend of $1.95 per share on its stock. The dividends are expected to grow at a constant rate of 6 percent per year, indefinitely. If investors require an 11 percent return on The Jackson-Timberlake Wardrobe Co. stock, what is the current price
Words: 421 - Pages: 2
On October 31, the stockholders’ equity section of Omar Company consists of common stock $600,000 and retained earnings $900,000. Omar is considering the following two courses of action: (1) declaring a 5% stock dividend on the 60,000, $10 par value shares outstanding, or (2) effecting a 2-for-1 stock split that will reduce par value to $5 per share. The current market price is $14 per share. Instructions Prepare a tabular summary of the effects of the alternative actions on the components
Words: 971 - Pages: 4
Chapter 5—Valuing Stocks MULTIPLE CHOICE 1. The first public sale of company stock to outside investors is called a/an a.|seasoned equity offering.| b.|shareholders’ meeting.| c.|initial public offering.| d.|proxy fight.| ANS: C DIF: E REF: 5.2 Primary Markets and Issuing New Securities 2. Which statement about common shareholders is incorrect? a.|Shareholders only have a residual claim.| b.|Shareholders have precedence over all other claimholders in the case of bankruptcy.|
Words: 5914 - Pages: 24
Chapter 5—Valuing Stocks MULTIPLE CHOICE 1. The first public sale of company stock to outside investors is called a/an a. seasoned equity offering. b. shareholders’ meeting. c. initial public offering. d. proxy fight. ANS: C DIF: E REF: 5.2 Primary Markets and Issuing New Securities 2. Which statement about common shareholders is incorrect? a. Shareholders only have a residual claim. b. Shareholders have precedence over all other claimholders in the case of bankruptcy. c. Shareholders have a
Words: 5880 - Pages: 24
Reflection Introduction Stock valuation is needed to ensuring the value of an organization’s stock and worth in the industry. There are various measuring methods that organizations can use to determining and establishing the value. Some of the methods and the reason for valuation have been identified below. Stock types and bonds: The stock valuation video covered the different types of stocks and well as bonds. There are common stocks and preferred stocks. Preferred stocks are considered to be a hybrid
Words: 574 - Pages: 3
when the owners sells or dies, tax benefits, and others. 2. Why is preferred stock referred to as preferred? What are some of the features added to preferred stock that make it more attractive to investors? Would you select preferred stock or common stock as an investment? Why? Preferred stock is referred to as “preferred” because they have preference over common stock of the company assets if it liquidates. Preferred stock has a fixed rate and usually not expiration. The investor gets priority
Words: 896 - Pages: 4
Objective One • Differentiate types of stocks issued by corporations Corporations issues different types of stocks to meet internal requirements and to satisfy public demand. According to wiki.fool.com, "...companies access the public markets to raise funds for expansion and debt repayment...each of the different types of stock represent a form of ownership." Common stock makes up the majority of stock issued. Common stock owners have ownership in the company and claim
Words: 668 - Pages: 3
This paper will give a financial analysis of two corporate moguls: Tyco International and General Electric Corporation. Through thorough research of each company’s shareholder’s equity, preferred stock equity, market capitalization, net profit margins and other factors, this paper will review which company’s strategy has presented a greater risk to the shareholder’s investment. It will also determine whether the investors who are assuming the risk have been rewarded with a greater investment.
Words: 761 - Pages: 4
Inc would cost $50 million in cash. CCI would gain $8.4 million to its earnings before interest and tax. There were three options that the board of directors debated over: issuing new common stock, issuing preferred stock or selling bonds. As Ms. Thorp, evaluate the impact of the bond issue and of the stock issue on the EPS. What are the risks in each alternative? The bond alternative arranges to sell $50 million in bonds to a California insurance company with an interest rate of 10 percent
Words: 842 - Pages: 4
