A) A targeted share repurchase can be used to prevent a hostile takeover.
B) A targeted share repurchase can be used to increase the stock price if the company is undervalued.
C) Anti-takeover charter provisions are good for shareholders because they prevent a raider from stealing the company for a below-market price.
D) Shareholders want to prevent takeovers because they don't want the company purchased out from under them.
E) One tool of corporate governance is choosing a good investment banker.
G) B) and D)
Correct Answer
verified
Correct Answer
verified
A) Outside shareholders will pay less for stock if they think the original owners will consume perquisites.
B) Creditors have a claim on a firm's earning stream through the dividend payments they receive.
C) An example of asset switching is an option to exchange one piece of real estate for another.
D) An agency cost is the wage required to pay someone who is hired to perform a service.
E) An example of an agency cost is when an attorney hires an expert witness for a trial.
G) A) and C)
Correct Answer
verified
Correct Answer
verified
A) When an owner/manager sells stock to an outsider, that outsider now bears some of the costs of the owner/manager's perquisite consumption.
B) Lenders can't legally prevent a firm from engaging in asset switching.
C) Firms borrowing money have greater flexibility to use that money when there are debt covenants.
D) When lenders protect themselves from the risk of asset switching, the firm's WACC can decrease.
E) A lender calling in a corporate loan and then lending the funds out to a safer borrower is an example of asset switching.
G) All of the above
Correct Answer
verified
Correct Answer
verified
A) CEO is not the chairman of the board.
B) The board has many outsiders who have lots of other important commitments.
C) The board is as large as is possible.
D) Board members are paid at a rate higher than their peers and their payment is mostly cash.
E) The board has a majority of insiders from company management on it who bring first-hand knowledge of how the company operates.
G) A) and C)
Correct Answer
verified
Correct Answer
verified
A) In an agency relationship, the principal delegates decision-making authority to the agent.
B) In an agency relationship, the agent delegates authority to the principal.
C) An example of an agency relationship is when the CEO nominates a slate of candidates to be on the board of directors.
D) An example of an agency relationship is when a supervisor hires a forklift operator.
E) The supervisor-employee relation between a production line supervisor and a production line operator is an example of an agency relationship.
G) A) and E)
Correct Answer
verified
Correct Answer
verified
A) An inside director is a board member who also holds a managerial position in the company.
B) In a classified board, it is easier for dissidents to gain representation since fewer seats are up for election each year.
C) Inside directors are more concerned with shareholders' interests since they are more closely concerned with firm operations.
D) Since outside directors have no other connection with the firm, they are indebted to the CEO for putting them on the board.
E) Company sponsorship of a local charity is an example of a nonpecuniary benefit.
G) A) and D)
Correct Answer
verified
Correct Answer
verified
A) An example of an agency relationship is when a private individual hires a lawyer to prepare her defense in a lawsuit.
B) An example of an agency relationship is when a supervisor hires a forklift operator.
C) The supervisor-employee relation between a production line supervisor and a production line operator is an example of an agency relationship.
D) An agency cost is the wage required to pay someone who is hired to perform a service.
E) An example of an agency cost is when the board of directors pays a dividend to shareholders.
G) A) and D)
Correct Answer
verified
Correct Answer
verified
A) When lenders protect themselves from the risk of asset switching, the firm's WACC can increase.
B) An example of an agency cost is when the board of directors pays a dividend to shareholders.
C) An example of an agency cost is when an attorney hires an expert witness for a trial.
D) An example of asset switching is an option to exchange one piece of real estate for another.
E) Lenders can't legally prevent a firm from engaging in asset switching.
G) A) and B)
Correct Answer
verified
Correct Answer
verified
A) A corporate executive health club is an example of a nonpecuniary benefit.
B) When lenders protect themselves from the risk of asset switching by raising the interest rate, the firm's WACC can decrease.
C) A lender calling in a corporate loan and then lending the funds out to a safer borrower is an example of asset switching.
D) A supplier substituting a lower-quality raw material without approval is an example of asset switching.
E) An agency problem occurs when an owner/manager sells stock to an outside investor and the owner/manager fears the outside investor will consume too many perquisites.
G) B) and E)
Correct Answer
verified
Correct Answer
verified
B) False
Correct Answer
verified
Correct Answer
verified
A) One tool of corporate governance is how the company's charter affects the likelihood of a takeover.
B) One tool of corporate governance is stock repurchases.
C) One tool of corporate governance is a company's tax avoidance strategy.
D) One tool of corporate governance is choosing a good investment banker.
E) Creditors have a claim on a firm's earning stream through the dividend payments they receive.
G) A) and D)
Correct Answer
verified
Correct Answer
verified
Showing 41 - 51 of 51
Related Exams