Preemption means that stockholders __________ purchase additional shares of stock before any new investors.

• a.)
• are forbidden to
• b.)
• have the option to
• c.)
• can collectively vote to
• d.)
• are required to

Select one way that common stock differs from preferred stock.

• a.)
• In the case of bankruptcy, common stockholders receive assets before bondholders, whereas preferred stockholders do not.
• b.)
• Common stockholders typically have the right to vote on matters related to corporate policy.
• c.)
• Common stock typically does not come with preemptive rights, whereas preferred stock does.
• d.)
• Common stockholders are more likely to receive dividends than preferred stockholders.

Select the pairing that is correctly matched.

• a.)
• Common stock: must be redeemed upon completion of a defined term
• b.)
• Preferred stock: has a residual claim in the case of company liquidation
• c.)
• Preferred stock: usually sold with a fixed dividend attached to it
• d.)
• Common stock: may have a par value assigned to it

A university that purchases a portfolio of stocks to generate returns for its long-term growth is an example of an __________.

• a.)
• investor
• b.)
• intermediary
• c.)
• issuer
• d.)
• investment trust

Determine the value of a stock with the following variables using the constant growth model:

• Current annual dividend: $2 per share
• Required return rate: 6%
• Constant growth rate: 4%
• a.)
• $106
• b.)
• $104
• c.)
• $100
• d.)
• $53

Which descriptor relates to the market-based approach for valuing corporations?

• a.)
• Considers the price of common stock shares
• b.)
• Calculates a company's cost of capital
• c.)
• Determines the average cost of a unit of company income
• d.)
• Estimates the cost of replacing a company's resources