Page 455 - Business Principles and Management

C HAPTER 16 A SSESSMENT

21. Why would a corporation’s preferred stock probably cost more per
share than its common stock?
22. When might a business lease, rather than purchase, equipment?
What reasons other than the cost of the lease versus the cost of
purchasing the equipment would justify the decision to lease?
23. How can venture capitalists make a profit even when they often
invest in firms that eventually fail?

MAKE CONNECTIONS

24. Research The New York Stock Exchange is the largest stock exchange
in the world and dates back to the late 1700s. It has been an impor-
tant part of the economic growth of businesses in the United States
and has contributed to the economic success of many individual
investors. Use the Internet to study the history and growth of the
NYSE. Prepare several computer slides that highlight important
events and information in the history of the Exchange.
25. Technology Think carefully about the advantages and disadvantages of
the three forms of business ownership (sole proprietorship, partner-
ship, corporation) in raising equity capital. Use a word-processing
program to prepare a table that summarizes your analysis. Then
write a three-paragraph report that describes the circumstances
under which each of the forms of ownership would benefit in
raising equity capital.
26. Economics Use the Internet to gather information on current interest
rates. Identify the highest and lowest rates you can find for each of
the following:
a. 30-year fixed rate mortgage
b. APR for a personal credit card
c. 6-month Certificate of Deposit
d. 48-month new-car loan
e. a federal student loan for college
f. the federal prime lending rate

Prepare a chart to illustrate your findings. Compare your findings
with those of other students.
27. Oral Communication You are the chairman of the board of directors of
a corporation with a long and successful history. Stock prices have
been stable and a regular dividend has been paid each year for the
past 10 years. The board has decided that the business needs to in-
vest money to upgrade facilities and equipment. They believe the best
choice is to retain all profits for the next three years and not pay a
dividend. Interest rates are high, so borrowing the money would
be expensive. The board does not want to issue new stock and di-
lute the value of current stock. Prepare a three-minute speech you
will deliver to stockholders at the annual meeting justifying the deci-
sion. You know many stockholders will be upset that they won’t re-
ceive the expected dividends.

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