When securities are fairly priced, why would the original shareholders of a firm pay the present value

Fantastic news! We've Found the answer you've been seeking!

Question:

When securities are fairly priced, why would the original shareholders of a firm pay the present value of bankruptcy and financial distress costs?

Related Book For answer-question

Essentials of Investments

ISBN: 978-0078034695

9th edition

Authors: Zvi Bodie, Alex Kane, Alan Marcus

See More Books

Posted Date: Aug 02, 2018 01:42 AM

See More Questions

When securities are fairly priced, why would the original shareholders of a firm pay the present value of bankruptcy and financial distress costs?
A fairly priced unlevered firm plans to pay a dividend of $9 next year (t=1) which is expected to grow by 2.5% pa every year after that forever. This dividend growth rate is the stocks capital...
Why are the indirect costs of financial distress likely to be more important than the direct costs of bankruptcy?
Calculate the half life potential for Zn electrode is 0.01M Zn(NO 3 ) 2. Given that Zn 2+ + 2e= Zn E o = 0.763
Explain how pancreatic secretions are regulated.
The Robotron-Elotherm company is known for its expertise in power electronics for welding, induction bonding, and process heating. Originally known as Robotron, the company manufactured bonding...
Calculate the speed of sound in air, helium, and hydrogen. The temperature is $70^{\circ} \mathrm{F}$.
Company provided the following financial information for its installment-sales for the current year. Financial Data: Installment sales for current year...
Using activity-based costing, compute the overhead cost per unit for each model. (Round "Activity Rate" to 2 decim other answers to the nearest whole dollar amount.) Overhead cost per unit-Model X...
On August 31, Sunland Marine had an inventory of 21 boats at a cost of $2,100 each. Sunland does not expect any returns from sales of boats. The company uses a perpetual inventory system. During...
You are an audit manager at Rockwell & Co, a firm of Chartered Certified Accountants. You are responsible for the audit of the Hopper Group, a listed audit client which supplies ingredients to...
If the threshold frequency for a phot emissive surface is 3.95 E 14 Hz, what is the work function for the surface?
In addition to the applied bias voltage, a static external force of 500 nN is applied in the positive y-direction to the shuttle. What is the additional displacement due to the 500 nN force?
How much work must be done to boost a 1000 kg communications satellite from a low earth orbit with h = 300 km, where it is released by the space shuttle, to a geosynchronous orbit
Suppose a satellite is in a low-Earth orbit. Is it possible that the satellite will eventually fall to the ground? Why or why not
What is the velocity difference between the perihelion velocity at 1 AU (semimajor axis=2AU) and the circular orbit velocity at 1 AU?
Pillow Corporation acquired 80 percent ownership of Sheet Company on January 1, 20X7, for $173,000. At that date, the fair value of the noncontrolling interest was $43,250. The trial balances for the...
Periwinkle Company is a multinational organization. Its Parts Division is located in Lavender Land, while its Assembly Division is located in North Orchid. During the current year Periwinkle Companys...
Using the subquery, list the ID number, last name, first name, rank and salary of the BINS associate professor whose salary is higher than the highest salary of MGMT assistant professor. I want to...
In forming a portfolio of two risky assets, what must be true of the correlation coefficient between their returns if there are to be gains from diversification? Explain.
Mrs. Mary Atkins, age 66, has been your firm's client for five years, since the death of her husband, Dr. Charles Atkins. Dr. Atkins had built a successful newspaper business that he sold two years...
Suppose you forecast the information ratios of the seven international portfolios (as shown in Table 19.9B). Construct the optimal portfolio of the U.S. index with the seven portfolios and assess its...
The kinematic viscosity and specific gravity of a liquid are $3.5 \times 10^{-4} \mathrm{~m}^{2} / \mathrm{s}$ and 0.79, respectively. What is the dynamic viscosity of the liquid in SI units?
A liquid has a specific weight of $59 \mathrm{lb} / \mathrm{ft}^{3}$ and a dynamic viscosity of $2.75 \mathrm{lb} \cdot \mathrm{s} / \mathrm{ft}^{2}$. Determine its kinematic viscosity.
Fluids for which the shearing stress, $\tau$, is not linearly related to the rate of shearing strain, $\dot{\gamma}$, are designated as nonNewtonian fluids. Such fluids are commonplace and can...

When securities are fairly priced, why would the original shareholders of a firm pay the present value

Question:

Expert Answer:

Even if securities are fairly priced unique shareholders of a firm will still pay the ... View the full answer

Essentials of Investments

Students also viewed these finance questions