FIN 534 - Homework Chapter 7 Answers

1. The preemptive right is important to shareholders because it

a. will result in higher dividends per share.

b. is included in every corporate charter.

c. protects the current shareholders against a dilution of their ownership interests.

d. protects bondholders, and thus enables the firm to issue debt with a relatively low interest rate.

e. allows managers to buy additional shares below the current market price.

1. Companies can issue different classes of common stock. Which of the following statements concerning stock classes is CORRECT?

a. All common stocks, regardless of class, must have the same voting rights.

b. All firms have several classes of common stock.

c. All common stock, regardless of class, must pay the same dividend.

d....