Value of retained earnings on corporate balance sheet

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Reference no: EM131457813

1. The value of retained earnings on the corporate balance sheet represents the amount of earnings:

A. not paid out in dividends this period.

B. that are being held in cash.

C. over and above corporate income taxes.

D. reinvested in the firm since its inception.

2. A company is about to issue 1,000 new shares of stock at a market price of $33 per share. If the par value per share is $4, the increase in capital surplus from this stock issue will be:

A. $33,000.

B. $4,000.

C. $29,000.

D. $32,000.

3. Which one of the following statements is correct about a corporation in the 35% tax bracket that can invest either in a bond paying 8% interest or in the preferred stock of another corporation that pays a 6% dividend?

A. The preferred stock should be selected because its after-tax yield is 0.17% higher.

B. The preferred stock should be selected because its after-tax yield is 0.80% higher.

C. The bond should be selected because its after-tax yield is 0.17% lower.

D. The bond should be selected because its after-tax yield is 1.3% higher.

Reference no: EM131457813

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