under corporate charter board of directors is elected through either majority rule voting
stockholders have one vote for each share of stock they own and they must vote for
each open position
Otherwise it is a cumulative voting
Use of Financing:
corporations like it because 70% isnt subject to taxation.
Most preferred is held by corporate investors.
Money market preferred stock is preferred stock that has a dividend rate that is reset at
auction every 49 days.
One advantage of p
The Time Value of Money
Interestmoney paid (earned) for the use of money
Rate of interest can be used to express the time value of money
interest paid (earned) on only the original amount, or principal, borrowed (lent)
Method of Depreciation- depreciation is the systematic allocation of the cost of a capital
asset over a period of time for financial and tax purposes.
More depreciation is less taxes.
Most profitable firms prefer to use an accelerated d
Serial bonds mature periodically until final maturity. Investor is able to choose the
maturity that best fit their needs.
gives the corporation the option to buy back its bonds at a stated price before their
Sale of Disposal of a Depreciable Asset:
If asset is sold for more than book value, it is a recapture of depreciation and is taxed at
firms ordinary tax rate.
If sold for less than book value an amount of taxable income is shielded from being
a bond issue secured by a mortgage or lien on the issuers property.
If no payment is made:
there is foreclosure and the trustee take the property and sell it and proceeds go to
There can be several mortgages on something, and
Cumulative Dividends Feature:
This is all cumulative unpaid dividends on the preferred stock must be paid before a
dividend may be paid on a common stock.
The accumulated payment is an arrearage.
Corporation cant deduct these dividends on taxes.
the process of identifying, analyzing, and selecting investment projects whose returns
(cash flows) are expected to extend far beyond one year.
Generating investment project proposals
Estimating after tax incremental operat
Book Value and Liquidating Value:
book value is the shareholders equity (total assets minus liabilities and preferred stock
on the balance sheet) divided by total number of shares outstanding.
Often assets sold for less than book value, and sometimes they