Almonte SoftTech Inc

question 26

Multiple Choice

Almonte SoftTech Inc. has 20 million common shares outstanding whose dividend has been $3.50 per quarter. It also has 7.5 million preferred shares outstanding with a dividend of $4.50 per year and no voting rights. The newly elected Board has decided to retain all earnings for the next year to help fund the development expansion of their new web server software. What are the Agency costs?

• A) $313.75 million, borne by all shareholders.
• B) Zero as the value from the unpaid dividends will be reflected in increased share prices.
• C) $33.75 million, borne by the preferred shareholders.
• D) $70 million, borne by the common shareholders.
• E) More than zero but less than $313.75 borne by shareholders opposed to the new dividend payout policy.

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Definitions:

Amplitude

the magnitude or intensity of a fluctuating wave or signal, such as in sound (volume), light (brightness), or electrical signals.

Brightness

A perceptual attribute of visual experience by which an area appears to emit more or less light.

Hue

A color or shade, particularly one that indicates the degree to which a stimulus can be described as similar to or different from stimuli that are described as red, green, blue, and yellow.

Iris

The colored part of the eye that controls the size of the pupil and thus the amount of light that enters the eye.