Explain why the following statement is wrong: “The stock price is equal to the value of equity, divided by shares outstanding. Therefore, companies should avoid issuing equity because the number of shares outstanding goes up and thus the stock price would decrease."

If the expected rate of return on a stock is less than the required rate of return, The stock is experiencing supernormal growth. The stock should not be bought. The company is probably not trying to maximize its stock price. The stock is a good buy. Dividends are not being declared.

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…

If a company’s market price rises above the IPO price, does that suggest that the company left money on the table and thus received less for the shares than it should have received? If most companies do leave money on the table, does that indicate the IPO market is inefficient? explain

Which of the following would not be an appropriate reason for a firm to repurchase its stock:   As an investment if management believes the market has undervalued the stock price.   In order to have sufficient shares to cover employee stock programs.   Solely to boost Earnings Per Share.   Both A and B.

“When the stock market declines the net worth of companies decreases, causing the problem of asymmetric information to decrease as well.” Is this statement true, false, or uncertain? Explain your answer.

Why might a company repurchase its own stock? A) It believes that the market undervalues its shares B) To offset dilutive effects of employee stock options granted C) To recognize an economic gain when the treasury shares are later sold for a profit D) To improve earnings per share by reducing the denominator E) All of the above is it just A and B or is it all of the above

-) Which of the following is NOT a reason companies purchase their own stock as treasury stock? O The company wants to increase its EPS O The company wants to have shares available for employee stock options. The company wants to increase stockholders' equity. O The company feels the stock is undervalued in the marketplace. 4

Answer the following as True or False, and then select the correct multiple choice answer: _________Declaring and paying a stock dividend decreases both Retained Earnings and Stockholders' Equity in total on the balance sheet ________Stock splits have no impact on Stockholders' Equity, but do change the par value of the stock. _______ Treasury Stock is considered a contra-equity account and therefore decreases the company's total Stockholders' Equity balance.

Explain the effect of D/E on asset returns, equity returns (assuming that cost of debt is not affected), asset beta and equity beta (assuming that debt beta is zero). Should an investor choose to invest in a stock of a company with high or low D/E, or why expected returns on these stocks are equivalent, although they are not equal?