Maggie owns 10% or 50,000 common shares of a small biotech company. although she has enjoyeda lot of control, maggie realizes that in order for the firm to acquire the funds to grow in arecessionary economy, it will need to issue more stock. unless she and others exercise preemptive rights, a. the company will surely begin to pay dividends. b.the new issue will dilute her ownershipc. the new issue will decrease the market price of the stockd. the new issue will be traded on the secondary market

If a firm plans to issue new stock, flotation costs (investment bankers' fees) should not be ignored. there are two approaches to use to account for flotation costs. the first approach is to add the sum of flotation costs for the debt, preferred, and common stock and add them to the initial investment cost. because the investment cost is increased, the project's expected return is reduced so it may not meet the firm's hurdle rate for acceptance of the project. the second approach involves adjusting the cost of common equity as follows: . the difference between the flotation-adjusted cost of equity and the cost of equity calculated without the flotation adjustment represents the flotation cost adjustment. quantitative problem: barton industries expects next year's annual dividend, d1, to be $1.90 and it expects dividends to grow at a constant rate g = 4.3%. the firm's current common stock price, p0, is $22.00. if it needs to issue new common stock, the firm will encounter a 6% flotation cost, f. assume that the cost of equity calculated without the flotation adjustment is 12% and the cost of old common equity is 11.5%. what is the flotation cost adjustment that must be added to its cost of retaine

How does your household gain from specialization and comparative advantage? (what is produced, what is not produced yet paid to a specialist to produce? )

The sec has historically raised questions regarding the independence of firms that derive a significant portion of their total revenues from one audit client or group of clients because the sec staff believes this situation causes cpa firms to