Economics

[QUESTION] Why would a company ever wish to use dual-class common stock in its financing instead of straight common stock?

[QUESTION] Why does most common stock have a low par value in relation to its market value?

[QUESTION] The common stockholder is considered the residual owner of a corporation. What does this mean in terms of risk and return?

[QUESTION] In any proxy attempt by an outside group to gain control of a company, the advantage lies with management. What are the reasons for this advantage?

[QUESTION] If Congress were to eliminate the double taxation of dividends so that a company could deduct dividend payments in the same way it does interest payments for tax purposes, what would be the effect on preferred stock and common stock financing?

[QUESTION] In the refunding decision, differential cash flows are discounted at the after-tax cost of debt. Explain why these cash flows are not discounted at the average cost of capital.

[QUESTION] Contrast serial bonds and bonds requiring a sinking fund.

[QUESTION] Are refundings by corporations likely to occur steadily over time? If not, when are waves of refundings likely to occur?

[QUESTION] [Problem 20.2] Five years ago, Zapata International issued $50 million of 10 percent, 25-year debentures at a price of $990 per bond to the public. The call price was originally $1,100 per bond the first year after issuance, and this price declined by $10 each subsequent year. Zapata is now “calling” the bonds in order to refund them at a lower interest rate. a. Ignoring taxes, what is a bondholder’s return on investment for the 5 years? (Assume that interest is paid once a year...

[QUESTION] [Problem 20.7] Mel Content, a disgruntled stockholder of the Penultimate Corporation, desires representation on the board. The Penultimate Corporation, which has 10 directors, has 1 million shares outstanding. a. How many shares would Mel have to control to be assured of 1 directorship under a plurality voting system? b. Recompute Part (a), assuming a cumulative voting system. c. Recompute Parts (a) and (b), assuming that the number of directors was reduced to 5.