Author Question: A firm has an outstanding issue of 1,000 shares of preferred stock with a 100 par value and an 8 ... (Read 93 times)

faduma · **on:** Jul 10, 2018

A firm has an outstanding issue of 1,000 shares of preferred stock with a 100 par value and an 8 percent annual dividend. The firm also has 5,000 shares of common stock outstanding.

If the stock is cumulative and the board of directors has passed the preferred dividend for the prior two years, how much must the preferred stockholders be paid prior to paying dividends to common stockholders at the end of third year?
A) 8,000
B) 16,000
C) 24,000
D) 25,000

Question 2

Which of the following is true of NPV profile?

A) It is used for evaluating and comparing independent projects when conflicting ranking exists.
B) It is a graph that illustrates a project's IRR against various values of NPV.
C) It shows an inverse relationship between a project's IRR and NPV.
D) It charts the net present value of a project as a function of the cost of capital.