True/False ( Marks- 1 x 5= 5 )

1. If shareholders do not like the policies that management pursues, their easiest solution is to vote in a different board of directors. ( Answer- )

2. The price at which new shares are sold to investors almost always exceeds par value. The difference is entered into the company's accounts as additional paid-in capital, or capital surplus.

( Answer- )

3. Suppose a firm needs fresh capital, but its management does not want to give up its controlling interest. The existing shares could be labeled Class A, and then Class B shares with limited voting rights could be issued to outside investors. ( Answer- )

4. When securities are priced fairly, then financing at current market rates is a positive NPV transaction. ( Answer- )

5. All large corporations have little debt; it is a necessary condition for maximizing growth. ( Answer- )