Financial managers should strive to maximize the current value per share of the existing stock because: | Homework.Study.com (2024)

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• The primary goal of financial management is to maximize which one of the following for a corporation? A. Current profits B. Market share C. Number of shares outstanding D. Market value of existing stock
• The primary goal of financial management is to: A) maximize current sales. B) maximize the current value per share of the existing stock C) avoid financial distress D) minimize operational costs.
• The primary goal of financial management is to: a. maximize current dividends per share of the existing stock. b. avoid financial distress. c. minimize operational costs and maximize firm efficiency. d. maximize the current value per share of the exis
• Which one of the following actions by a financial manager least meets the goal of financial management? a. Increasing current costs in order to increase the market value of the stockholders' equity. b
• You are employed in the Finance Division of a firm that has 321,570,000 shares outstanding. The current share price is $47.62. The forecast earnings are $1,057,760,000. Calculate the current market value of firm equity and the earnings per Share (EPS). T
• Keys Financial has done extremely well in recent years, and its stock now sells for $175 per share. Management wants to get the price down to a more typical level, which it thinks is $25 per share. Wh
• As a shareholder you want managers to: a. maximize share price. b. maximize profits. c. grow the firm as large as possible. d. minimize risk, even if that results in a reduced stock price. e. More tha
• The present value of the cash flows expected to come from owning a share of stock. a. is the maximum price an investor should be willing to pay for the share. b. is the minimum price an investor sho
• Often it is argued that Managers should not focus on the current stock price because this leads to an over-emphasis on short term profits at the expense of long-term profits. Is this true?
• A company wants to raise $100 million. The subscription price is $17, and the current stock price is $27. The firm currently has 2,500,000 shares outstanding. 1. What is the current market capitalization? 2. How many shares must be issued? 3. How many
• A firm has warrants outstanding for investors to purchase 50,000 shares at $25 per share. The current stock price is $40. The firm has 1 million shares outstanding and earnings per share of $1.50. Wh
• Is it bad to invest in a company that has a lot of short positions? I m looking at one that is putting itself up for sale. There s so much value for acquisition at above current value, but the % of sh
• The management of Blue Thumb Tools believes the firm's current capital structure is optimal and intends to maintain it in the future. Blue Thumb's bonds are selling for $950 each. Its common stock is selling for $37 a share and its preferred stock is sell
• If a shareholder wishes to sell his or her shares in order to finance greater consumption, the greater the _____, the greater are his or her consumption opportunities.
• Calculate the cost of 5.25% $100 preferred stock if the current market value per share is $75.00. a. 12% b. 5.25% c. 7% d. 11.37% e. 19.74%
• A company wants to raise $50 million. The subscription price is $23, and the current stock price is $27. The firm currently has 3,500,000 shares outstanding. 1. What is the current market capitalizat
• Managers should not focus on the current stock value because doing so will lead to an overemphasis on short term profits and the expense of long term profits True False Explain.
• A firm's new president wants to strengthen the company's financial position. Which of the following actions would make it financially stronger? A.Increase inventories while holding sales constant.
• You are managing a portfolio of 10 stocks which are held in equal dollar amounts. The current beta of the portfolio is 1.55, and the beta of stock a is 2.0. If stock A is sold and the proceeds are use
• Should stockholder wealth maximization be thought of as a long-term or a short-term goal? For example, if one action would probably increase the firm s stock price from a current level of $20 to $25 in six months and then to $30 in five years, but another
• A firm wants to strengthen its financial position. Which of the following actions would increase its current ratio? a. Use cash to repurchase some of the company's own stock. b. Use cash to increase i
• The current market value of Tanus Corporation's equity is $90 million. The company has 25 million outstanding shares and will issue 5 million new shares. The investment banker charges a 7% spread. a.
• The management of Blue Thumb Tools believes the firm's current capital structure is optimal and intends to maintain it in the future. Blue Thumb's bonds are selling for 950 each. Its common stock is s
• Should stockholder wealth maximization be thought of as a long-term or a short-term goal? For example, if one action increases a firm's stock price from a current level of $20 to $25 in 6 months, and then to $30 in 5 years, but another action keeps the st
• Is value investing outdated today?
• Will the delisting of Xero shares from NZX enhance shareholders value? Why?
• Should stockholder wealth maximization be thought of as a long-term or a short-term goal? For example, if one action increases a firm's stock price from a current level of $20 to $25 in 6 months and then to $30 in 5 years but another action keeps the stoc
• Suppose a stock is selling today for $55/share and there are 10,000,000 shares outstanding. If earnings are projected to be $20,000,000, how much value are investors assigning to growth per share? Ass
• Will it be the right time to buy Yes Bank shares? As an investor, will you buy it or not in the current condition?
• Today, Stock A is worth $20, and has 1000 shares outstanding. Stock B costs $30, and has 500 shares outstanding. Stock C is priced at $50 per share, and has 1200 shares outstanding. If tomorrow, Stock
• The current stock price for a company is $34 per share, and there are 7 million shares outstanding. This firm also has 170,000 bonds outstanding, which pay interest semiannually. If these bonds have a
• The current stock price for a company is $35 per share, and there are 2 million shares outstanding. This firm also has 90,000 bonds outstanding, which pay interest semiannually. If these bonds have a
• The primary operating goal of a publicly-owned firm interested in serving its stockholders should be to a. Maximize the stock price per share over the long run, which is the stock's intrinsic value. b
• When shares of stock are sold from one investor to another, they will trade at: A. Par value. B. Book value. C. Market value. D. Stated Value.
• Your parents spent $7,800 to buy 200 shares of stock in a new company 12 years ago. The stock has appreciated 14.6% per year on average. What is the current value of those 200 shares? a. $36,408.70 b. $40,023.03 c. $39,580.92 d. $40,515.08 e. $37,449.92
• A firm has 12,000,000 shares outstanding. The firm's current stock price per share is $35 and the earnings per share is $1.75. At what stock price per share will the PE ratio remain constant if the firm's Earnings per Share decreases to $1.69? a. $36.20 b
• Should stockholders' wealth maximization be thought of as a long-term or a short-term goal? For example, if one action increases a firm's stock price from a current level of $20 to $25 in 6 months and then to $30 in 5 years but another action keeps the st
• Tempo Corp. will issue preferred stock to finance a new artillery line. The firm's existing preferred stock pays a dividend of $4.00 per share and is selling for $30 per share. Investment bankers have
• What is the current per share pricing range for equities between broker/dealers and institutional investors?
• An investor has unrealized gains in 100 shares of Amazing stock upon which they do not wish to pay taxes. However, they are now bearish upon the stock for the short term. The stock is at $76 and he bu
• You are the CEO of Valu-Added Industries, Inc. (VAI). Your firm has 10,000 shares of common stock outstanding, and the current price of the stock is $100 per share. There is no debt; thus, the "market
• In publicly traded corporations, the goal of the financial manager would be: A. profit maximization B. manager wealth maximization C. stock price maximization D. shareholder wealth maximization
• Suppose your firm wishes to finance a project using retained earnings. The current price of the firm's common stock is $100, the current price of the firm's preferred stock is $95, the firm's preferre
• Buoyant Cruises plans to issue preferred stock with a $120 par value and a 5% dividend. Even though the current market value of its preferred stock is $80 per share, Buoyant expects to net only $75 for each share issued. What is its cost of issuing prefer
• Evaluate the statement: "Managers should not focus on the present stock value of the company. Instead, they should focus on the profitability of the company. Doing so will result in increasing the val
• For Put Options, the __________ the existing market price of the underlying financial instrument relative to the exercise price, the ____________ option premium. a.higher; higher b.higher; lower c.lower; lower d.lower; higher e.Both b and d are
• An acquirer buys a firm, liquidates it, and turns a handsome profit because the value of the firm's individual parts (if sold off separately) is greater than its current market value. a. diversification b. managers' personal incentives c. breakup value d.
• The current market price of Digicomm's common stock is $40 per share. The company has 600,000 common shares outstanding. To finance its growing business, the company needs to raise $2 million. Due to
• The CFO of Globex Corp. has decided that the company needs to raise additional capital. It can sell preferred stock with a $6 divident per share for $100 per share; however, it will incur a flotation
• Evaluate the following statement: Managers should not focus on the current stock value because doing so will lead to an overemphasis on the short term profits at the expense of long-term profits.
• H.M. Hornes Company earned $3.5 million after taxes this year, with 1.0 million shares outstanding. Earnings per share were $3.50, shares have recently been sold at $72.00 among current shareholders. Two dollars of this value are explained by the anticipa
• Do investors realize that the top tier of the investment management has migrated to hedge funds?
• Buoyant Cruises plans to issue preferred stock with a $120 par value and a 5 per cent dividend. Even though the current market value of its preferred stock is $80 per share, Buoyant expects to net onl
• An acquiring firm is willing to pay a 25 percent premium for a target firm's shares, currently selling at $20 per share. The target has one million shares outstanding, current assets of $5 million, fi
• A customer buys 100 shares of ABC stock at $50 and buys 1 ABC Jan 50 Put@ $5. The maximum potential gain is: A. $500 B. $4,500 C. $5,500 D. Unlimited
• If you were a major shareholder of a publicly traded firm, would you prefer that stock options be traded on the company's stock? Why or why not?
• Is it good to sell stocks of value equivalent to the net investment value when stock rises and keep the remaining free stocks for the longterm?
• If you want to determine whether fund managers have an ability to outperform the stock market, given that many of them are likely to beat the market, does it make sense to look for these high-ability managers among the better historical performers? Explai
• Your parents spent $7,800 to purchase 200 shares of stock in a new company 12 years ago. The stock has appreciated 14.6 percent per year on average. What is the current value of those 200 shares?
• In recent years, top managers have been given large packages of options, giving them the right to buy stock in the firm at a fixed price. Will these compensation schemes make managers more responsive
• ABC Corp. will issue 200,000 shares of stock, which will be available to the existing shareholders at a preferential subscription price of $36.45. Existing shareholders receive one right per share and 20 rights are required to be eligible to purchase one
• A portfolio manager is managing a portfolio of an investor. The investor holds the following stocks: |Stock| Investment |Beta |A| $ 2,000,000 |0.80 |B |5,000,000 |1.10 |C |3,000,000 |1.40 |D |5,0
• A firm's current market value of equity is $20 million. It has one million shares outstanding. The firm's equity multiplier is one, and it had sales of $50 million last year. Its profit margin was 5%. What is the firm's implied price-earnings ratio? a. 40
• Filer Manufacturing has 7.3 million shares of common stock outstanding. The current share price is $43, and
• The Cooper Corporation has $10,000,000 in earnings after taxes and 2,000,000 shares outstanding. Shares are currently trading at a P/E of 12. Cooper has $6,000,000 in excess cash available to return to investors. A) What is the current price of the stock?
• Firms must make investment decisions every day. With the goal of maximizing value to the firm most firms measure investment values using the Net Present Value Decision Rule, that is in terms of cash t
• The primary goal of the corporation is to: a. maximize the wealth of shareholders. b. be socially responsible. c. act in the highest possible ethical manner at all times. d. maximize stock price. e. M
• Firm X is being acquired by Firm Y for $45,000 worth of Firm Y stock (valued at the pre-merger current price of Y). Both firms are "all-equity" financed. The incremental value created by the merger is
• Financial managers can take a variety of actions to influence the market value of a company's stock. All of the following are classifications of actions taken EXCEPT: a. investing decisions b. finan
• The Smooth Sail Corporation intends to issue 50,000 new shares to raise funds for expansion of current plant facilities. The current share price is $40 and there are 500,000 shares outstanding. The number of rights needed to buy a share of stock should be
• A firm that wishes to raise additional equity capital by selling a portion of the existing owners' stock while maintaining control of the firm should consider a . A)stock split B)stock dividend C)share repurchase D)separate class of nonvoting stock
• An investor purchases a stock for $49 and a put for $45 with a strike price of $44. The investor sells a call for $ 45 with a strike price of $57. What is the maximum profit and loss for this position
• An investor purchases stock for $48 and a put for $.40 with a strike price of $42. The investor sells a call for $.40 with a strike price of $55. What is the maximum profit and loss for this position?
• An investor purchases a stock for $52 and a put for 60 with a strike price of $50. The investor sells a call for $60 with a strike price of $58. What is the maximum profit and loss for this position?
• A CFO wants to sell a security. The CFO knows the true value. She is willing to sell the security at a maximum discount of 15%. A potential investor does not know the true value but does know that the
• A company has the following financing outstanding:Debt: 189,347 bonds with a quoted price of $846.1 Preferred Stock: 87,358 shares of preferred stock with a current price of $114.2
• State true or false and justify your answer: Book value per share is of greater concern to a financial manager than the market value per share.
• Black Cat stock is currently selling for $38 a share while the minimum price for the stock to remain listed is $5 a share. If the firm's management wants to restore the stock price to roughly three ti
• Filer Manufacturing has 6 million shares of common stock outstanding. The current share price is $72, and the book value per share is $7. The company also has two bond issues outstanding. The first bo
• Filer Manufacturing has 7 million shares of common stock outstanding. The current share price is $73, and the book value per share is $8. The company also has two bond issues outstanding. The first bo
• Filer Manufacturing has 6 million shares of common stock outstanding. The current share price is $78, and the book value per share is $5. The company also has two bond issues outstanding. The first bo
• Filer Manufacturing has 9 million shares of common stock outstanding. The current share price is $81, and the book value per share is $8. The company also has two bond issues outstanding. The first bo
• Filer Manufacturing has 5 million shares of common stock outstanding. The current share price is $71, and the book value per share is $6. The company also has two bond issues outstanding. The first bo
• Filer Manufacturing has 8 million shares of common stock outstanding. The current share price is $80, and the book value per share is $7. The company also has two bond issues outstanding. The first bo
• Filer Manufacturing has 5 million shares of common stock outstanding. The current share price is $77, and the book value per share is $8. The company also has two bond issues outstanding. The first bo
• Filer Manufacturing has 6 million shares of common stock outstanding. The current share price is $85, and the book value per share is $8. The company also has two bond issues outstanding. The first bo
• Filer Manufacturing has 7 million shares of common stock outstanding. The current share price is $79, and the book value per share is $6. The company also has two bond issues outstanding. The first bo
• Filer Manufacturing has 6 million shares of common stock outstanding. The current share price is $89, and the book value per share is $8. The company also has two bond issues outstanding. The first bo
• Ten years ago, Stigler Company issued $100 par value preferred stock yielding 6%. The preferred stock is now selling for $102 per share. What is the approximate current yield or cost of the preferred stock? (Disregard flotation costs.) A) 8% B) 7.76% C
• An investor purchases 300 shares of ABC stock for $15.00 a share and immediately sells 2 covered call contracts at a strike price of $20.00 a share. The premium is $2.00 a share. What is the maximum p
• Analysts that follow JPMorgan Chase, one of the nation's largest providers of financial services, estimate that the corporation's earnings per share will increase, from $4.68 in the current year, to $
• Analysts that follow JPMorgan Chase, one of the nation's largest providers of financial services, estimate that the corporation's earnings per share will increase, from $5.56 in the current year, to $
• Brown Corporation currently has 14 million shares of stock outstanding at a price of $38 per share. The company would like to raise money and has announced a rights issue. Every existing shareholder w
• New York Co has 16,000,000 shares outstanding. It wishes to issue 1,600,000 new shares using a rights issue. If the current stock price is 25 and the subscription price is 21 per share, calculate the
• In your analysis of DBM Corporation, you find that the current earnings per share are $5.00 per share, and most analysts are projecting the earnings per share to grow at a 12% rate annually. What can you expect the earnings per share of this firm to be in
• Ten years ago. Stigler Company issued $100 par value preferred stock yielding 6%. The preferred stock is now selling for $102 per share. What is the approximate current yield or cost of the preferred stock? (Disregard notation costs.) A) 8% B) 7.76% C)
• Investors who wish to liquidate their holdings in a closed-end fund may _______________. A. sell their shares back to the fund at a discount if they wish B. sell their shares back to the fund at net
• A company wants to raise $100 million on a new stock issue. According to their investment banker, a sale of new stock will require 8% under pricing and a 7% spread. Assuming the company's stock price does not change from its current price of $100 per shar
• Is value investing still relevant today? Is it wise to stay away from online and social media companies?