What does it mean when preferred stock has a cumulative feature?
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- Which of the following statements concerning common stock and the investment banking process is NOT CORRECT? a. The preemptive right gives each existing common stockholder the right to purchase his or her proportionate share of a new stock issue. b. The announcement of a large issue of new stock could cause the stock price to fall. This loss is called "market pressure," and it is treated as a flotation cost because it is a cost to stockholders that is associated with the new issue. c. If a firm sells 1,000,000 new shares of Class B stock, the transaction occurs in the primary market. d. Listing a large firm's stock is often considered to be beneficial to stockholders because the increases in liquidity and reputation probably outweigh the additional costs to the firm. e. Stockholders have the right to elect the firm's directors, who in turn select the officers who manage the business. If stockholders are dissatisfied with…"The dividend discount model is used to find the price of a stock based on the expected dividends received by the shareholder and the discount rate. Therefore, all else constant, the price of a share of stock will increase if the discount rate decreases." A) True B) FalseWhich of the following statement(s) is(are) TRUE? (i) The valuation price of a stock primarily depends on expected future dividends to its shareholders and its required rate of return. (ii) An investor who intends to sell a stock after holding it for a short period will forgo all future dividends, thus will be willing to pay for a lower price for the stock compared to another investor who prefers to hold the share for a longer period. (iii) The valuation share price is positively related to the share's required rate of return.
- According to the basic Dividend Discount model, the value an investor should assign to a share of stock is dependent on the length of time he or she plans to hold the stock. Is the above statement True or False? Please Explain.2. Which of the following is a characteristic of preferred stock?A. Give voting rights to its owner.B. It is like annuity.C. Investors cannot force the payment of the dividend.D. Dividends are tax-deductible for the firm as opposed to interest payment.Which of the following statements is/are true? I. For preferred stock, dividends can be deferred indefinitely. II. Preferred stock generally does not carry voting rights. III. One way to value preferred stock is using the perpetuity formula. This method assumes that the preferred stock gets an infinite stream of constant dividends. IV. Price of preferred stock = dividend / required rate of return. Question 2 options: All are correct Only I, II, and Ill are correct Only I and II are correct
- Answer the multiple-choice question below: 1. Which of the following is/are incorrect about the characteristics of preferred stock: I.It has a fixed maturity date II.Dividends are tax-deductible III.Dividend payments vary just like common stock IV.Can be easily converted to a number of common stock Select one: a. I and II only b. I only c. I, II, and III only d. All of the aboveEvaluate the following statement: When a firm pays dividend, its stock price decreases in the market. Therefore, it is always better to buy a stock on the date of dividend payment.Which of the following is a feature associated with preferred stock? Preferred stockholders are entitled to dividends Preferred stock is not perpetual in nature Preferred stockholders do not have voting rights In case of liquidation, preferred stockholders have less priority over common stockholders Dividends on any type of preferred stock do not accumulate in arrears and are not paid at a later date if firms are currently unable to pay
- The price of the new share after dividends are paid is showing as incorrect?All of the following is true about a Stock dividend except, Select one: a. The stock price declines proportionally after the dividend is paid b. The pre-dividend price is higher than the post-dividend price c. It is commonly expressed as a percentage d. The number of outstanding shares will decrease after a stock dividend.Match each description with the characteristic of preferred stock that it best describes. A. Cumulative B. Noncumulative C. Nonparticipating D. Participating 1. Receives current and all past dividends before common stockholders receive any dividends. 2. Receives dividends exceeding the stated rate under certain conditions. 3. Not entitled to receive dividends in excess of the stated rate. 4. Loses any dividends that are not declared in the current year.
