Which of the Following Statements Is CORRECT

question 52

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 free cash flow valuation model, V_ops =FCF₁/(WACC − g), cannot be used for firms that have negative growth rates.
• D) The free cash flow valuation model, V_ops = FCF₁/(WACC − g), can be used only for firms whose growth rates exceed their WACC.
• 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:

Period Costs

Expenses that are not directly tied to the production of goods and are instead expensed in the period they are incurred.

Manufacture Products

The process of converting raw materials or components into finished goods through the use of labor, machinery, and equipment, typically within an industrial setting.

Product Costs

All costs involved in acquiring or producing products, including direct materials, direct labor, and manufacturing overhead.

Period Costs

Costs that are expensed in the period in which they are incurred, not directly associated with production, such as selling and administrative expenses.