Exam 15: Raising Capital

Mountain Products has decided to raise $6 million via a rights offering. The company will issue one right for each share of stock outstanding. The subscription price is set at $20 per share. The current market price of the stock is $25.20 and there are 1,500,000 shares currently outstanding. What is the value of one right?

The raising of small amounts of capital from a large number of people is known as:

The Securities and Exchange Commission:

Roy owns 200 shares of RTF Inc. He has opted not to participate in the current rights offering by this company. As a result, Roy will most likely be subject to:

Jeff's is granting one right for each share of stock outstanding for its new rights offering. The new shares in this offering are priced at $16 plus four rights. The current market price of the stock is $20 a share. What is the value of one right?

Which one of the following statements is correct?

All of the following are supporting arguments in favor of IPO underpricing except which one?

Before a seasoned stock offering, you owned 500 shares of a firm that had 20,000 shares outstanding. After the seasoned offering, you still owned 500 shares but the number of shares outstanding rose to 25,000. Which one of the following terms best describes this situation?

You own 8,000 shares, or 5 percent, of Printers Ink stock. Your shares are valued at $279,280. By what percentage will the total value of your investment change if the company sells an additional 7,500 shares of stock at $33.50 a share and you do not buy any?

Flagler Inc. needs to raise $11.6 million, including all accounting and legal fees, to finance its expansion so has decided to sell new shares of equity via a general cash offering. The offer price is $22.50 per share and the underwriting spread is 7.85 percent. How many shares need to be sold?

Jones & Co. recently went public and received $23.07 a share on their entire offer of 30,000 shares. Keeser & Co. served as the underwriter and sold 28,500 shares to the public at an offer price of $26.50 a share. What type of underwriting was this?

A syndicate can best be defined as a:

Which one of the following statements is correct concerning the direct costs of issuing securities?

Atlas Corp. wants to raise $2.6 million via a rights offering. The company currently has 450,000 shares of common stock outstanding that sell for $26 per share. Its underwriter has set a subscription price of $22 per share and will charge the company a spread of 7 percent. Assume you currently own 1,200 shares of this stock and decide not to participate in the rights offering. How much money should you receive for selling all of your rights?

Which one of the following statements concerning venture capitalists is correct?

You have been instructed to place an order for a client to purchase 500 shares of every IPO that comes to market. The next two IPOs are each priced at $26 a share and will begin trading on the same day. The client is allocated 500 shares of IPO A and 240 shares of IPO B. At the end of the first day of trading, IPO A was selling for $23.90 a share and IPO B was selling for $29.40 a share. What is the client's total profit or loss on these two IPOs as of the end of the first day of trading?

Which one of the following statements concerning dilution is correct?

During a 12-month period, a company is permitted to issue new securities through crowdfunding up to a limit of:

Which one of the following statements concerning venture capital financing is correct?

Rhodes Trucking is considering investing in a new $3.7 million project that will increase net income by 2.7 percent. This project will be completely funded by issuing new equity shares. Currently, the firm has 647,400 shares of stock outstanding with a market price of $41 per share. The current earnings per share are $3.02. What will the earnings per share be if the project is implemented?