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F. Naz
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Are these questions TRUE OR FALSEa) A proxy is a document

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Are these questions TRUE OR FALSE
a) A proxy is a document giving one party the authority to act for another party, including the power to vote shares of common stock. Proxies can be important tools relating to control of firms.

b) The preemptive right gives current stockholders the right to purchase, on a pro rata basis, any new shares issued by the firm. This right helps protect current stockholders against both dilution of control and dilution of value.

c) If a firm's stockholders are given the preemptive right, this means that stockholders have the right to call for a meeting to vote to replace the management. Without the preemptive right, dissident stockholders would have to seek a change in management through a proxy fight.

d) Classified stock differentiates various classes of common stock, and using it is one way companies can meet special needs such as when owners of a start-up firm need additional equity capital but don't want to relinquish voting control.

e) Founders' shares are a type of classified stock where the shares are owned by the firm's founders, and they can have more votes per share than the other classes of common stock.

f) The total return on a share of stock refers to the dividend yield less any commissions paid when the stock is purchased and sold.

g) The cash flows associated with common stock are more difficult to estimate than those related to bonds because stock has a residual claim against the company versus a contractual obligation for a bond.

h) According to the basic DCF stock valuation 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.

i) Two firms with the same expected dividend and growth rates must also have the same stock price.

j) Projected free cash flows should be discounted at the firm's weighted average cost of capital to find the value of its operations.

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Submitted: 4 years ago.
Category: Multiple Problems
Expert:  F. Naz replied 4 years ago.
Are these questions TRUE OR FALSE
a) A proxy is a document giving one party the authority to act for another party, including the power to vote shares of common stock. Proxies can be important tools relating to control of firms. True

b) The preemptive right gives current stockholders the right to purchase, on a pro rata basis, any new shares issued by the firm. This right helps protect current stockholders against both dilution of control and dilution of value. True

c) If a firm's stockholders are given the preemptive right, this means that stockholders have the right to call for a meeting to vote to replace the management. Without the preemptive right, dissident stockholders would have to seek a change in management through a proxy fight. False

d) Classified stock differentiates various classes of common stock, and using it is one way companies can meet special needs such as when owners of a start-up firm need additional equity capital but don't want to relinquish voting control. True

e) Founders' shares are a type of classified stock where the shares are owned by the firm's founders, and they can have more votes per share than the other classes of common stock. True

f) The total return on a share of stock refers to the dividend yield less any commissions paid when the stock is purchased and sold. False

g) The cash flows associated with common stock are more difficult to estimate than those related to bonds because stock has a residual claim against the company versus a contractual obligation for a bond. True

h) According to the basic DCF stock valuation 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. False

i) Two firms with the same expected dividend and growth rates must also have the same stock price. False

j) Projected free cash flows should be discounted at the firm's weighted average cost of capital to find the value of its operations. True
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