1. _______________ are when the firm announces that they will but back stock at various times over the next several years.

a. Stock Dividends

b. Open Market Repurchases

c. Dividend Reinvestment Plans

d. Tender Offer Repurchases

2. Which of the following statements is correct?

a. If a firm repurchases its stock in the open market and then resells it later on at a higher price, then they will be subject to capital gains taxes.

b. An open-market dividend reinvestment plan will be most attractive to companies that need new equity and would be looking to issue additional shares of common stock.

c. Stock repurchases tend to increase financial leverage.

d. If a company declares a 2-for-1 stock split, its stock price should roughly double

3. Which statement is TRUE?

a) Under a sale and leaseback arrangement, the seller of the property is the lessor and the buyer is the lessee.

b) A sale and leaseback arrangement is a type of operating lease.

c) Operating leases help to shift the risk of obsolescence from the user to the lessor.

d) Capital Leases are a form of Off-balance sheet financing

4. Which of the following statements is NOT CORRECT?

a. Owners of preferred stock have greater voting rights than common shareholders.

b. From the investor's perspective, preferred stock is riskier than bonds.

c. Companies are more likely to issue preferred stock if they have a low tax bracket since preferred stock dividends are not tax deductible.

5. Which of the following statements is CORRECT?

a. Both warrants and convertibles are types of option securities.

b. Convertibles bring in additional funds when converted, while warrants do not.

c. Return on Assets will rise after a Convertible Bond is exchanged for equity.

d. Off balance sheet financing may make a company appear less risky than it actually is because its stated debt ratio will appear lower.

6. Which statement is false?

a) A convertible bond gives the bondholder the right to exchange their bonds for a preset number of shares of stock.

b) A right is a bond with a call option held by the bondholder and thus has a higher price and a lower yield than similar bonds.

c) A warrant is basically a long term option that is sold with bonds but that can be detached (bought and sold separately) from the bond

d) Most preferred stock is owned by other companies due to the 70% exclusion of dividends.

7. A firm has 20,000,000 shares of stock outstanding at a price of $40 per share. They gave each shareholder the right to buy .25 shares of stock for $7 (4 rights would give them the right to buy one share for $28. How much is each right worth?

a) $.83 b) $1.45 c) $1.94 d) $2.40

8. A firm has Net Income of 200,000 and 50,000 shares of common stock outstanding. However, they have 10,000 shares of Preferred Stock which received $2 per share in dividends. They also had warrants that can be converted into 20,000 shares of common stock for $25. Their current stock price is $30. They also have 600 bonds with a face value of 1,000 and a coupon rate of 6%. These bonds can be converted into15,000 shares of stock. Their marginal tax rate is 40%. What is their Primary EPS available to common shareholders?

a) $2.37 b) $3.38 c) $3.6 d) $4.17