CVJI 77.doc

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Which one of the following does not affect the total equity of a firm but does increase the number of shares outstanding?
(Points : 4)
special dividend
stock split
share repurchase
rights offer
liquidating dividend
Which one of the following is a direct result of a 2-for-1 stock split?
(Points : 4)
a 100 percent increase in the number of shareholders
a 100 percent increase in the common stock account balance
a 100 percent decrease in the stock price
a 50 percent increase in the number of shares outstanding
a 50 percent decrease in the par value per share
Which of the following statements are correct in relation to M&M Proposition II with no taxes?
I. The required return on assets is equal to the weighted average cost of capital.
II. Financial risk is determined by the debt-equity ratio.
III. Financial risk determines the return on assets.
IV. The cost of equity declines when the amount of leverage used by a firm rises.
(Points : 4)
I and III only
II and IV only
I and II only
III and IV only
I and IV only
A prospectus is a letter issued by the SEC authorizing a new issue of securities.
(Points : 4)
True
False
The Securities and Exchange Commission:
(Points : 4)
verifies the accuracy of the information contained in the prospectus.
verifies the accuracy of the information contained in the red herring.
examines the registration statement during the Green Shoe period.
is concerned only that an issue complies with all rules and regulations.
determines the final offer price once they have approved the registration statement