Companies Can Issue Different Classes of Common Stock

question 58

Multiple Choice

Companies can issue different classes of common stock. Which of the following statements concerning stock classes is most correct?

• A) All common stocks fall into one of three classes: A, B, and C.
• B) Most firms have several classes of common stock outstanding.
• C) All common stock, regardless of class, must have voting rights.
• D) All common stock, regardless of class, must have the same dividend privileges.
• E) None of the statements above is necessarily true.

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Definitions:

Risk-Free Rate

The estimated profit percentage from an investment considered free of risk, typically indicated by government bonds' interest rates.

Common Stock

A type of security that represents ownership in a corporation, entitling the holder to vote at shareholder meetings and receive dividends.

Weighted Average Cost of Capital

This refers to the overall cost of capital for a firm, weighted by each capital component's proportion in the overall capital structure.

Market Value of Equity

The total dollar market value of a company's outstanding shares, calculated as share price times the number of shares outstanding.