1) The difference between the rights-on and ex-rights price is equal to the subscription
price divided by N, where N is the number of rights needed to purchase a new share of
stock.
2) The cash savings from reduced dividend payments resulting from a stock repurchase
strategy can allow the company to increase its dividends for remaining shareholders.
3) The purchasing power parity theory of exchange rates suggests that exchange rates
will adjust until the cost of equivalent goods is approximately equal in each country.
4) In determining the cost of debt, yields and prices of the firm’s outstanding bonds
could be used.
5) The guidelines of the International Accounting Standards Board have been
successfully reconciled with the rules of the FASB in the United States as of 2010 .
6) The underwriting spread is the guaranteed minimum profit to an investment bank for
each share distributed.
7) Most mergers are horizontal in nature in order to avoid the potential antitrust
complications involved with the elimination of competition.
8) The cash-generating process for a firm is continuous, even though cash flow can be
sporadic.
9) Projects that are totally uncorrelated should provide some overall reduction in
portfolio risk.
10) Shelf registration has nearly eliminated competition in the investment banking
industry.
11) The real value of a firm is the same from an economic and accounting perspective.
12) The ‘strong form” of the efficient market hypothesis states that prices reflect all
public information.
13) The sale of corporate bonds held by the firm as a long-term investment would
increase cash flows from investing activities on the statement of cash flows.
14) Contribution margin is equal to fixed costs minus variable costs.
15) The income statement measures the increase in the assets of a firm over a period of
time.
16) When the euro rises and the dollar falls, foreign travel to Europe becomes cheaper
for Americans.