A Corporate Charter Specifies That the Company May Issue Up

question 60

Multiple Choice

A corporate charter specifies that the company may issue up to 20 million shares of stock.The company sells 12 million shares to investors and later buys back 3 million shares.The current number of shares of treasury stock after these transactions have been accounted for is:

• A)3 million shares.
• B)8 million shares.
• C)9 million shares.
• D)17 million shares.

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Definitions:

Required Return

The smallest annual percent yield necessary to convince people or corporations to allocate funds towards a certain security or project.

WACC

Weighted Average Cost of Capital, a calculation of a firm's cost of capital in which each category of capital is proportionately weighted, used to determine the rate of return a company must earn on its existing assets to satisfy its creditors, owners, and other providers of capital.

Low Risk Projects

Investments or projects that are considered to have a lower probability of resulting in a financial loss.

Investor Risk Aversion

The tendency of investors to prefer lower-risk investments to avoid potential losses.