Which of the Following Would Not Be a Sensible Explanation

question 11

Multiple Choice

Which of the following would not be a sensible explanation of why convertibles and warrants are issued if markets are efficient?

• A)Cash flow from these securities best match cash flow of the firm.
• B)If the firm does well, convertible bonds will turn out to have been the better alternative versus issuing common stock.
• C)The securities are useful when it is costly to assess the risk of the issuing firm.
• D)The securities may resolve agency problems associated with raising money.
• E)All of the above are sensible explanations.

Grasp the practice and setting of government-to-citizen communications in public affairs.

Evaluate measures of success in public affairs campaigns.

Learn about historical legislative additions impacting communications.

Understand efforts to curb government spending on communications.

---

Definitions:

Positive Net Present Value

A situation where the present value of cash inflows exceeds the present value of cash outflows, indicating a profitable investment.

Book Value Weights

Utilized in calculating weighted average cost of capital (WACC), referring to the proportion of each type of capital (debt, equity) based on its book value.

Market Values

The current prices at which assets, securities, or goods can be bought or sold in a marketplace, reflecting their perceived worth by buyers and sellers.

Cost of Capital

The rate of return that a company must earn on its investment projects to maintain its market value and attract funds, including the cost of debt and the cost of equity.