(a)
To explain: T is ordinary shareholder or not.
Introduction:
Direct Stockholder’s Intervention: Most of the shares are owned by institutional investors such as insurance companies pension funds, and rather than individual. These institutional investor control over the firm’s operation and oversee the management operation.
(b)
To explain: The manager should vote its shares or should pass those votes on a pro-rata basis, back to its own shareholders.
Introduction:
Direct Stockholder’s Intervention: Most of the shares are owned by institutional investors such as insurance companies pension funds, and rather than individual. These institutional investor control over the firm’s operation and oversee the management operation.
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Chapter 1 Solutions
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
- Robert Campbell and Carol Morris are senior vice-presidents of the Mutual of Chicago Insurance Company. They are co-directors of the company’s pension fund management division, with Campbell having responsibility for fixed income securities (primarily bonds) and Morris being responsible for equity investments. A major new client, the California League of Cities, has requested that Mutual of Chicago present an investment seminar to the mayors of the represented cities. Campbell and Morris, who will make the actual presentation, have asked you to help them by answering the following questions. How do you determine the value of a bond?arrow_forwardWhich of the following statement is True for Preference shares? a. The company cannot raise funds unless it is authorized by the bank b. The company can raise only 50% of finance after it is approval c. The company can raise maximum 90% of finance after it is approval d. The company can raise funds if it is authorized by its articles for sucarrow_forwardIn June 2001, in Oman, the Capital Market Authority issued the Corporate Governance Code, applicable to companies whose securities are listed on the Muscat Securities Market.The Code, drawn from codes of best practices from around the world but adapted to the local market, seeks to promote a "culture of compliance, transparency and accountability without limiting business initiative. Answer the following three questions . 30. Which of the following is not one of the International code of Corporate Governance? a. The role of Chairman and chief executive officer should be separated b. On retiring, a Chief Executive should become a chairman. c. At least half the board, excluding the chairman, should comprise non-executive directors d. Levels of remuneration should be sufficient to attract and retain directorsarrow_forward
- Lois Kenseth, president of Sycamore Corporation, is concerned about several large stockholders who have been very vocal lately in their criticisms of her leadership. She thinks they might mount a campaign to have her removed as the corporation's CEO. She decides that buying them out by purchasing their shares could eliminate them as opponents, and she is confident they would accept a “good” offer. Kenseth knows the corporation's cash position is decent, so it has the cash to complete the transaction. She also knows the purchase of these shares will increase earnings per share, which should make other investors quite happy. (Earnings per share is calculated by dividing net income available for the common shareholders by the weighted-average number of shares outstanding. Therefore, if the number of shares outstanding is decreased by purchasing treasury shares, earnings per share increases.) Instructions Answer the following questions. a. Who are the stakeholders in this situation? b.…arrow_forwardWhich of the following statements is NOT CORRECT? When a corporation’s shares are owned by a few individuals who own most of the stock or are part of the firm’s management, we say that the firm is “closely, or privately, held.” “Going public” establishes a firm’s true intrinsic value and ensures that a liquid market will always exist for the firm’s shares. Publicly owned companies have sold shares to investors who are not associated with management, and they must register with and report to a regulatory agency such as the SEC. When stock in a closely held corporation is offered to the public for the first time, the transaction is called “going public,” and the market for such stock is called the new issue market.arrow_forward(Treasury Stock—Ethics) Lois Kenseth, president of Sycamore Corporation, is concerned about several large stockholders who have been very vocal lately in their criticisms of her leadership. She thinks they might mount a campaign to have her removed as the corporation’s CEO. She decides that buying them out by purchasing their shares could eliminate them as opponents, and she is confident they would accept a “good” offer. Kenseth knows the corporation’s cash position is decent, so it has the cash to complete the transaction. She also knows the purchase of these shares will increase earnings per share, which should make other investors quite happy. (Earnings per share is calculated by dividing net income available for the common shareholders by the weighted-average number of shares outstanding. Therefore, if the number of shares outstanding is decreased by purchasing treasury shares, earnings per share increases.)InstructionsAnswer the following questions.(a) Who are the stakeholders in…arrow_forward
- Which of the following investments in mutual funds would not create an independence problem for auditor Gomez? Group of answer choices a. Gomez owns a few shares of the Wensleydale Mutual Fund (WMF) and is on his firm's audit team for WMF. b. Gomez owns 3% of the shares of a diversified mutual fund that owns stock in Minotaur Corporation. Gomez is on his firm's audit team for Minotaur. c. Gomez owns 20% of the shares of a diversified mutual fund that owns stock in Faber Corporation. Gomez is on his firm's audit team for Faber. d. Gomez owns 30% of the shares of an undiversified mutual fund that owns stock in Woodson Corporation. Gomez is on his firm's audit team for Woodson.arrow_forwardBrad Dolan, a stockholder of Rhode Corporation, has asked you, the firm's accountant, to explain why his stock warrants were not included in diluted EPS. In order to explain this situation, you must briefly explain what dilutive securities are, why they are included in the EPS calculation, and why some securities are antidilutive and thus not included in this calculation. Rhode Corporation earned $228,000 during the period, when it had an average of 100,000 shares of common stock outstanding. The common stock sold at an average market price of $25 per share during the period. Also outstanding were 30,000 warrants that could be exercised to purchase one share of common stock at $30 per warrant. Instructions Write Mr. Dolan a 1–1.5-page letter explaining why the warrants are not included in the calculation.arrow_forwardYou found a bunch of printed shares of a corporation whose shares are traded in Borsa İstanbul at your father’s suitcase. Your father told you that you can do whatever you like with those printed shares. You decided to sell the shares. You submitted the printed shares to the brokerage house (investment firm) and they told you that they cannot sell those printed shares. Are they correct, why? If not, why?arrow_forward
- In the 2020 accounting year, investors made a number observations in terms of certain decisions some corporations were taking:(i) The board of directors of some manufacturing and services companies decided to pay stock dividends instead of cash dividends;(ii) On the other hand, the board of directors of majority of companies within the ICT industry decided to pay special cash dividends;(iii) It was also observed that some the management of some companies had decided to repurchase shares while others were engaging in stock splits. What could be the reason for these three decisions and choice of dividend payments by the boards of these companies and what will be the effect of such decisions on the outstanding number of shares and the share prices of these companies?arrow_forwardSam Strother and Shawna Tibbs are vice-presidents of Mutual of Seattle Insurance Company and co-directors of the company's pension fund management division. A major new client, the Northwestern Municipal Alliance, has requested that Mutual of Seattle present an investment seminar to the mayors of the represented cities, and Strother and Tibbs, who will make the actual presentation, have asked you to help them by answering the following questions. How is the value of a bond determined? What is the value of a 10-year, $1,000 par value bond with a 10 percent annual coupon if its required rate of return is 10 percent? Does the bond sell at par?arrow_forwardYou are offered a job you know that accepting this job may eventually lead to a promotion into the role of the financial manager. As the potential financial manager, what federal and shareholder requirements would you need to be familiar with in order to ensure that you are being completely compliant? While investigating the shares offered to you by your potential boss, you discover that the company you are considering working for is not registered as required under the Securities Act of 1933. How does this influence you as a potential employee and as a potential shareholder relative to any applicable statutes or laws?arrow_forward
- EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT