Exam 14: Raising Equity Capital

Which of the following is a reason why an investor would choose to invest in new and growing firms as a limited partner in a venture capital firm rather than making those investments directly by themselves?

What is the difference between preferred stocks issued by a private company and a mature company?

Which of the following best describes a limited partnership that specializes in raising money to invest in the private equity of young firms?

Use the table for the question(s) below. The founders and owners of a private company have funded it through the following rounds of investment: The owners decide to take the company public through an IPO, issuing 1 million new shares. Assuming that they successfully complete the IPO, the net income for the next year is estimated to be $5 million. The price of shares is set using average price-earnings ratios for similar businesses of 17.0. -What portion of the company will be owned by the angel investor after the IPO?

The announcement of an SEO usually raises a stock's price.

How does the total cost of issuing stock for the first time compare to the costs of other securities?

Use the information for the question(s) below. You founded your own firm three years ago. You initially contributed $200,000 of your own money and in return you received 2 million shares of stock. Since then, you have sold an additional 1 million shares of stock to angel investors. You are now considering raising capital from a venture capital firm. This venture capital firm would invest $5 million and would receive 2 million newly issued shares in return. -After the venture capitalist's investment,the post-money valuation of the angel investor's shares are closest to:

Felicity Industries is selling 2 million shares of stock in an auction IPO.At the end of the bidding period they have received the bids shown above.Which of the following is closest to the price at which the shares will be offered?

A situation in which the underwriter does not guarantee the stock will be sold,but instead tries to sell the stock for the best possible price is

A large publishing firm specializing in college textbooks wishes to expand into online delivery of its materials.In order to facilitate this,it invests in a number of small start-up companies that deliver college courses online and uses these companies to start diversifying the delivery of its content.Which of the following best describes the role of the publishing firm as described above?

Which of the following statements regarding selling shares to the public is most accurate?

Which of the following is a reason why an IPO is attractive to the managers of a private company?

Melissa founded her company using $100,000 of her own money,issuing herself 50,000 shares of stock.An angel investor bought an additional 30,000 shares for $75,000.She now sells another 30,000 shares to a venture capitalist for $450,000.What percentage of the firm does Melissa now own?

Which of the following statements regarding SEOs is most accurate?

A cash offer differs from a rights offer in that in the latter shares are offered to both existing shareholders and investors at large.

Which of the following best describes an auction IPO?

Use the table for the question(s) below. Jeremy founded a company. He issues 200,000 shares of series A stock for his own $100,000 investment. He then goes through three further rounds of investment, as shown below: -What is the post-money valuation for the series D funding round?

An IPO is offered at $17 per share for 3 million shares.The IPO underwriters had a spread of 7%.What price did the underwriters pay per share of the IPO firm?

Which of the following statements concerning the volume and number of IPOs issued over time is most accurate?

Which of the following is an advantage of a cash offer over a rights offer?