Which of the Following Statements Is CORRECT

question 19

Multiple Choice

Which of the following statements is CORRECT?

• A) 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.
• B) The preemptive right gives stockholders the right to approve or disapprove of a merger between their company and some other company.
• C) 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.
• D) The stock valuation model, P0 = D1/(rs - g), cannot be used for firms that have negative growth rates.
• E) The stock valuation model, P0 = D1/(rs - g), can be used only for firms whose growth rates exceed their required returns.

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Definitions:

Marginal Revenue

The extra revenue a company earns by selling an additional unit of a product or service.

Output Level

The quantity of goods or services produced by a business, industry, or economy at a given time.

Consumer Surplus

The gap in the total amount consumers are ready and capable of investing in a service or good and the actual outlay they make.

Maximum Price

A price ceiling set by a governing body, above which a particular good or service cannot be sold to prevent prices from becoming prohibitively high.