Cash paid to acquire treasury stock should be shown on the statement of cash flows under investing activities
a. True
b. False
Indicate whether the statement is true or false
False
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If only common stock is outstanding, total stockholders' equity divided by the number of shares of common stock outstanding is called the
a. par or stated value per share. b. call value per share. c. book value per share. d. market value per share.
The ________ prohibits monopolies and activities (price-fixing, predatory pricing) that restrain trade or competition in interstate commerce
A) Sherman Antitrust Act B) Lanham Trademark Act C) Fair Packaging and Labeling Act D) CAN-SPAM Act E) Magnuson-Moss Warranty Act
Which of the following scenarios best illustrates a good stakeholder strategy?
A. PA Corp. distributes only 40 percent of its annual profit after taxes to shareholders, while the remaining is invested for further research, and distributed among employees and the local community. B. VP Inc. follows a strategy in which maximization of the shareholder's wealth is the primary concern of the managers. C. Gen Pharma Corp. ensures that it fully exploits free natural resources, so that most of its profits go to shareholders in the form of dividends. D. Carrvero Inc. ensures that its employees are paid the least in the industry so that its external stakeholders can get the best price.
The Naugatuck Railway is currently all equity financed, but it is considering a leveraged capital structure. Selected financial information for Naugatuck is provided in the table below
Assume that all cash flows occur at the end of the year and we are currently at the beginning of a year. Assume that taxes are zero. Assume that all of net income is paid out as a dividend. Assume that the debt is perpetual with an annual coupon rate of 4% (and yield of 4%). Assume that individual investors can borrow and lend at the same interest rate (and with the same terms) as corporations. Under the proposed levered capital structure, Naugatuck will use all of the new debt to repurchase (and cancel) shares. Bill Strong, a brakeman for the railway, bought 100 shares of Naugatuck at $40. Bill receives annual dividend income of $200 under the current capital structure. Bill likes the return on investment that he could earn under the proposed levered capital structure, but Naugatuck has announced that it will not go forward with the change in capital structure. If Bill borrows $2,400 and buys shares, then what are his annual investment cash flows? Capital Structure Capital Structure All Equity Levered EBIT $200,000 $200,000 Debt, D 0 $1,500,000 Cost of Debt, kd N/A 4% Shares Outstanding 100,000 62,500 Stock Price $40.00 $40.00 Earnings per share $2.00 Dividend per share $2.00 A) $200 B) $224 C) $245 D) $267 E) $320