common stock
Which of the following statements is CORRECT?
a. The preemptive right is a provision in the corporate charter that gives common stockholders the right to purchase (on a pro rata basis) new issues of the firm’s common stock.
b. The stock valuation model, P0 = D1/(rs – g), can be used only for firms whose growth rates exceed their required return.
c. The preemptive right gives stockholders the right to approve or disapprove of a merger between their company and some other company.
d. The stock valuation model, P0 = D1/(rs – g), cannot be used for firms that have negative growth rates.
e. If a company has two classes of common stock, Class A and Class B, the stocks may pay different dividends, but under all state charters the two classes must have the same voting rights.
common stock