Which of the Following Statements Is CORRECT

question 90

Multiple Choice

Which of the following statements is CORRECT?

• A) the preemptive right gives stockholders the right to approve or disapprove of a merger between their company and some other company.
• B) 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.
• C) the stock valuation model, p0 = d1/(rs σ g), cannot be used for firms that have negative growth rates.
• D) the stock valuation model, p0 = d1/(rs σ g), can be used only for firms whose growth rates exceed their required returns.
• E) 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.

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Definitions:

Capital Budgeting

The process used by companies to evaluate and select long-term investments that are likely to help achieve their financial goals.

Investment

Designating financial means with the prospect of attaining profit or income.

Capital Intensity Ratio

A financial metric that compares a company's total assets to its sales revenue, used to evaluate how much capital is needed to generate sales.

Total Assets

The sum of all assets owned by a company, including current, fixed, and intangible assets, as reported on the balance sheet.