The Preemptive Right Is Important to Shareholders Because It

question 39

Multiple Choice

The preemptive right is important to shareholders because it

• A) will result in higher dividends per share.
• B) is included in every corporate charter.
• C) protects the current shareholders against a dilution of their ownership interests.
• D) protects bondholders, and thus enables the firm to issue debt with a relatively low interest rate.
• E) allows managers to buy additional shares below the current market price.

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Definitions:

Probability of Success

The likelihood of achieving a desired outcome or result in an experiment or trial.

Normal Distribution

A bell-shaped data distribution where most observations cluster around the central peak and the probabilities for values further away from the mean taper off equally in both directions.

Sample Proportion

The fraction or percentage of a sample that exhibits a particular trait or attribute.

Population Proportion

The percentage of individuals in a population who share a certain characteristic or attribute.