Which of the following statements is CORRECT?
A. The preemptive right gives stockholders the right to approve or disapprove of a merger between their company and some other company.
B. The preemptive right is a provision in the corporate charter that gives common stockholders the right to purchase (on a pro rata basis) new issues of the firm's common stock.
C. The free cash flow valuation model, Vops =FCF1/(WACC ? g), cannot be used for firms that have negative growth rates.
D. The free cash flow valuation model, Vops = FCF1/(WACC ? g), can be used only for firms whose growth rates exceed their WACC.
E. If a company has two classes of common stock, Class A and Class B, the stocks may pay different dividends, but under all state charters the two classes must have the same voting rights.
Answer: B
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