Question 1

In return for providing funds, venture capitalists receive:

Accepted Answer

A) long-term bonds of the firm. 
B) short-term bonds of the firm. 
C) an equity position in the firm. 
D) ownership of the entire firm. 
A) long-term bonds of the firm. 
B) short-term bonds of the firm. 
C) an equity position in the firm. 
D) ownership of the entire firm.

Question 2

How much will a firm receive in net funding from a firm commitment underwriting of 250,000 shares priced to the public at $40 if a 10% underwriting spread has been added to the price paid by the underwriter? Additionally, the firm pays $600,000 in legal fees.

Accepted Answer

A) $8,400,000 
B) $8,460,000 
C) $8,490,000 
D) $8,545,455 
A) $8,400,000 
B) $8,460,000 
C) $8,490,000 
D) $8,545,455

Question 3

IPOs are generally overpriced in order to raise large amounts of cash.

Accepted Answer

A) True 
 B)False

Question 4

Why do provincial securities commissions deem it necessary to require the issuance of a prospectus prior to security issuance?

Accepted Answer

In the case of newly issued securities b

Question 5

Provincial securities regulations exist in order to:

Accepted Answer

A) protect stock underwriters from fraudulent firms. 
B) restrict the amount of profit from IPOs. 
C) control the amount of stock owned by one investor. 
D) protect investors from deceptive firms. 
A) protect stock underwriters from fraudulent firms. 
B) restrict the amount of profit from IPOs. 
C) control the amount of stock owned by one investor. 
D) protect investors from deceptive firms.

Question 6

Which of the following statements is generally true concerning the costs of security issue?

Accepted Answer

A) underpricing is rarely a significant cost. 
B) equity is cheaper to issue than debt. 
C) debt is cheaper to issue than equity. 
D) there are no economies of scale in security issuance. 
A) underpricing is rarely a significant cost. 
B) equity is cheaper to issue than debt. 
C) debt is cheaper to issue than equity. 
D) there are no economies of scale in security issuance.

Question 7

Young companies have also used the Web to raise money from small investors.This development is known as

Accepted Answer

A) crowdfunding 
B) group funding 
C) Internet funding 
D) venture sourcing 
A) crowdfunding 
B) group funding 
C) Internet funding 
D) venture sourcing

Question 8

Issue costs for equity are higher than those for debt for all of the following reasons except:

Accepted Answer

A) equity issues have higher administrative costs. 
B) underwriting stock is riskier than underwriting bonds. 
C) equity issues involve significantly more time to sell. 
D) equity issues have lower economies of scale. 
A) equity issues have higher administrative costs. 
B) underwriting stock is riskier than underwriting bonds. 
C) equity issues involve significantly more time to sell. 
D) equity issues have lower economies of scale.

Question 9

What would you expect to be the market price of stock after a sold-out rights issue if each existing shareholder purchases one new share at $60 for each three that they currently hold and the current share price is $100?

Accepted Answer

A) $75.00 
B) $80.00 
C) $85.00 
D) $90.00 
A) $75.00 
B) $80.00 
C) $85.00 
D) $90.00

Question 10

What are the advantages and disadvantages to a new or small firm of getting capital funding from a venture capital firm?

Accepted Answer

Venture capital firms receive unsolicite

Question 11

An underwriter issues a firm commitment to sell 1 million shares at $20 each, including a $2 spread.How much does the issuing firm receive if only 500,000 shares are sold?

Accepted Answer

A) $9 million 
B) $10 million 
C) $18 million 
D) $20 million 
A) $9 million 
B) $10 million 
C) $18 million 
D) $20 million

Question 12

Which of the following statements is incorrect concerning private placements?

Accepted Answer

A) terms of the financing can be custom-tailored. 
B) the securities are not made available to the public. 
C) the securities are often less marketable. 
D) only a small amount of corporate debt is financed in this manner. 
A) terms of the financing can be custom-tailored. 
B) the securities are not made available to the public. 
C) the securities are often less marketable. 
D) only a small amount of corporate debt is financed in this manner.

Question 13

Ying Corporation, Inc.plans to issue 10 million additional shares of its stock.The investment bank recommends net proceeds of $19.90 per share and will charge an underwriter's spread of 5.5% of the gross proceeds.In addition, Ying Corporation must pay $2 million in legal and other administrative expenses.Calculate the gross proceeds and the total funds received by Ying Corporation from the sale of the 10 million shares of stock.

Accepted Answer

10,000,000 × $19.90 = $199,000,000 = Tot

Question 14

An investor exercises her right to buy one additional share at $20 for every five shares held.How much should each share be worth after the rights issue if they previously sold for $50 each?

Accepted Answer

A) $35.00 
B) $41.67 
C) $45.00 
D) $46.00 
A) $35.00 
B) $41.67 
C) $45.00 
D) $46.00

Question 15

Bought deals are more common in the U.S.than in Canada.

Accepted Answer

A) True 
 B)False

Question 16

What will be the share price after the rights issue?

Accepted Answer

The current value of the firm is $40 mil

Question 17

Private placement of debt securities occurs more frequently in:

Accepted Answer

A) smaller-sized firms. 
B) larger-sized firms. 
C) firms that are using venture capitalists. 
D) combination with convertible bonds. 
A) smaller-sized firms. 
B) larger-sized firms. 
C) firms that are using venture capitalists. 
D) combination with convertible bonds.

Question 18

Second-stage financing:

Accepted Answer

A) involves a substantial increase in leverage. 
B) immediately precedes first-stage financing for every new business. 
C) involves issuing more stock. 
D) occurs when the company is in danger of bankruptcy. 
A) involves a substantial increase in leverage. 
B) immediately precedes first-stage financing for every new business. 
C) involves issuing more stock. 
D) occurs when the company is in danger of bankruptcy.

Question 19

Stanfield Inc.needs to raise $12.5 million in capital.The company's investment bankers recommend an offer price (or gross proceeds) of $15 per share; and Stanfield will receive $14 per share.How many shares of stock will Don's need to sell in order to receive the $12.5 million they need? Calculate the underwriter's spread on the issue.

Accepted Answer

Funds needed = $12.5 million =

Question 20

How do firms make initial public offerings and what are the costs of such offerings?

Accepted Answer

The initial public offering is the first

Exam 15: Venture Capital, Ipos, and Seasoned Offerings

In return for providing funds, venture capitalists receive:

How much will a firm receive in net funding from a firm commitment underwriting of 250,000 shares priced to the public at $40 if a 10% underwriting spread has been added to the price paid by the underwriter? Additionally, the firm pays $600,000 in legal fees.

IPOs are generally overpriced in order to raise large amounts of cash.

Why do provincial securities commissions deem it necessary to require the issuance of a prospectus prior to security issuance?

Provincial securities regulations exist in order to:

Which of the following statements is generally true concerning the costs of security issue?

Young companies have also used the Web to raise money from small investors.This development is known as

Issue costs for equity are higher than those for debt for all of the following reasons except:

What would you expect to be the market price of stock after a sold-out rights issue if each existing shareholder purchases one new share at $60 for each three that they currently hold and the current share price is $100?

What are the advantages and disadvantages to a new or small firm of getting capital funding from a venture capital firm?

An underwriter issues a firm commitment to sell 1 million shares at $20 each, including a $2 spread.How much does the issuing firm receive if only 500,000 shares are sold?

Which of the following statements is incorrect concerning private placements?

An investor exercises her right to buy one additional share at $20 for every five shares held.How much should each share be worth after the rights issue if they previously sold for $50 each?

Bought deals are more common in the U.S.than in Canada.

What will be the share price after the rights issue?

Private placement of debt securities occurs more frequently in:

Second-stage financing:

How do firms make initial public offerings and what are the costs of such offerings?

Goals and Governance of the Firm

Financial Markets and Institutions

Accounting and Finance

Measuring Corporate Performance

The Time Value of Money

Valuing Bonds

Valuing Stocks

Net Present Value and Other Investment Criteria

Using Discounted Cash Flow Analysis to Make Investment Decisions

Project Analysis

Introduction to Risk, Return, and the Opportunity Cost of Capital

Risk, Return, and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Introduction to Corporate Financing and Governance

Debt Policy

Leasing

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Cash and Inventory Management

Credit Management and Collection

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Filters