Question 1:
“The shareholder’s most basic responsibility is to supply capital. In practice, though, it is anything from simple. Corporations do require cash to spend in expansion, but they do not obtain it from a single sort of shareholder. To raise funds, they offer two types of shares on the market (common and preference)”. Following above statement answer the following question in very detail with suitable examples.
What is the significance of the term “preference shareholders”?
Why would a corporation issue preferred stock when it already has common stock?
Are the rights of common and preference shareholders the same?
What are the similarities and differences between preferred and common stocks?
Question 2:
‘what is this idea of financial market and what does it tell me?’ Provide an with
examples.
the idea of various source of finance. How does it is divided?’ Provide an answer explaining in very detail what they are telling the user.
Question 3:
Vin Group Company uses a 10% interest rate for all capital expenditures and has done the following analysis for four projects for the upcoming year:
Project A
Project B
Project C
Project D
Initial capital outlay
$200,000
$298,000
$248,000
$272,000
Annual net cash inflows
Year 1
65,000
100,000
80,000
95,000
Year 2
70,000
135,000
95,000
125,000
Year 3
80,000
90,000
90,000
90,000
Year 4
40,000
65,000
80,000
60,000
You are required to select one of the above projects using Accounting Rate of Return;
Payback Period; Net Present Value.
Which project(s) company should undertake using NPV if it has 500,000 funds available?
1
1
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