1. The cumulative earnings of the company after dividends.
Which of the following is an argument for the relevance of dividends?
Reduction of uncertainty
Some investors' preference for current income.
1. permits what is known as a shelf registration.
SEC Rule 415
A company can ensure the complete success of a rights offering by making use of a
2. The market price of K-T-Lew Corporation's common stock is $60 per share, a
Rule 144a makes it tougher to resell privately placed securities.
It makes it EASIER, permitting the sale of letter stock to
QUALIFITED BUYERS (large institutions) without a previously required
When stocks are bought "rights-on," th
1. The participating feature allows preferred shareholders to share in increasing
dividends with the common shareholders.
2. Preferred stockholders have a prior claim on the assets of the firm as compared to
the claims of the lenders.
It is jus
The irregular exercise and sale of rights over the subscription period.
But remember it is not the dividend/split itself that causes the positive
stock price reaction, but rather the positive information these signals convey.
1. Privately placed common stock that cannot be immediately resold to the general
2. Companies with high growth rates tend to have high dividend-payout ratios because
they want to attract more investors.
High growth rate companies tend to
Financial signaling occurs when capital structure changes convey information to
1. In a world of taxes, bankruptcy costs, and other market imperfections, there is likely
to be an optimal capital structure for the firm.
2. Financial timin
1. its the WEIGHTED AVERAGE of these 3 components
2. A firm's overall cost of capital is simply the sum of the firm's cost of equity, cost of
debt, and cost of preferred stock.
3. A bond's yield to maturity (YTM):
is the same thing as the before-t
A sometimes questionable assumption underlying the capital-asset pricing model
approach to project evaluation is that only the systematic risk of the firm is important.
That ko remains constant regardless of changes in leverage.
The traditional approach t
To protect bondholders
Which of the following bonds offer the investor the most protection?
A company refunds its bonds for any of the following reasons EXCEPT for:
To eliminate restrictive covenants.
To reduce interest costs.