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c. redeem the stock for the total amount paid by the shareholder at the time the stock was
issued
d. redeem the stock in exchange for common stock
E. Financial leverage involves
a. using preferred stock to retain voting contro of a corPoration
b. the issuance of bonds because the firm is umable to sell stock
c. uaing funds with a limited rate of return to finance a portion of the assets of the firm
d. mone of these
3. The stockholders’ equty of Sutton Corporation at Dec. 31, 1996, is shown below: stock-
holders’ equity:
’
Common stock, $10 par, l00, 000 shares authorized, 40, 000 shares issued ..’ $400, 000
Additional paid -- in capitsl: common stock..’ -.’ ... .., ... ... ... . ... $200, 000
Total paid -- in capital.-’ ..’ ... ... ... ... ... -.. ... ... . . ... .-. $600, 000
Retained earnings"’ ..’ .-. ... ... ... .’. ... ... ... ... ... ... ... ... $l, 500, 000
Total stockholders’s equity.-’ ..’ ... ... -.. ... -.. ... ... ... .. .. ... $2, 100, 000
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