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 statement about book value per share (BVPS) is true? A. Market price per share usually approximates BVPS. B. BVPS can be misleading because it is based on historical cost. C. Market price per share greater than BVPS is an indication of an overvalued stock. D. BVPS is the amount that would be paid to shareholders if the firm is sold to another firm.

Why might a rational investor invest in the stock of a company that pays no dividend?

Indicate whether its TRUE or FALSE. Then give an explanation. Firms concerned with the sharemarket reaction to dividend announcements may adopt a “sticky” dividend policy.

The history of the stock market shows that there are a large number of start -up corporations whose stock price traded at high market values despite large losses and never any positive earnings. Why would investors be willing to pay a high price for the stock of a corporation that has never reported positive earnings?

We discussed several explanations for dividend levels by various firms. Which of the following would best help achieve the primary objective?   A. Firms should be reluctant to increase dividends B. Taking into account taxes and costs, dividends are irrelevant C. Dividend decisions should be made with a perspective on the cost of capital, project analysis, and shareholder value D. Signaling should be the most important consideration  E. None

True or False: The following statement accurately describes how firms make decisions related to issuing new common stock. Taking flotation costs into account will reduce the cost of new common stock.   False: Flotation costs are additional costs associated with raising new common stock.   True: Taking flotation costs into account will reduce the cost of new common stock, because you will multiply the cost of new common stock by 1 minus the flotation cost—similar to how the after-tax cost of debt is calculated.     Alpha Moose Transporters is considering investing in a one-year project that requires an initial investment of $475,000. To do so, it will have to issue new common stock and will incur a flotation cost of 2.00%. At the end of the year, the project is expected to produce a cash inflow of $595,000. The rate of return that Alpha Moose expects to earn on its project (net of its flotation costs) is (18.25, 20.53, 22.81, 14.83)     (rounded to two decimal…

State whether the following statement is true or false and provide a written explanation of your answer. “The Dividend Growth Model (a.k.a Gordon Model) is a ridiculous model to use to value a share. Firstly, it assumes that the company will be around forever, whereas we know that lots of companies will eventually disappear because of takeovers and mergers and this model doesn’t allow for that. Secondly, it assumes that dividends grow at the rate of inflation which is not necessarily correct.”

True or False: The following statement accurately describes how firms make decisions related to issuing new common stock. Taking flotation costs into account will reduce the cost of new common stock.   True: Taking flotation costs into account will reduce the cost of new common stock, because you will multiply the cost of new common stock by 1 minus the flotation cost—similar to how the after-tax cost of debt is calculated.   False: Flotation costs are additional costs associated with raising new common stock.     Sunny Day Manufacturing Company is considering investing in a one-year project that requires an initial investment of $475,000. To do so, it will have to issue new common stock and will incur a flotation cost of 2.00%. At the end of the year, the project is expected to produce a cash inflow of $550,000. The rate of return that Sunny Day expects to earn on its project (net of its flotation costs) is     (rounded to two decimal places).   White Lion…

According to Modigliani and Miller, a firm's dividend policy is irrelevant:   if the financial markets are inefficient   if the financial markets are perfect   if the financial markets are efficient   if all investors are rational   because dividends are discretionary