Question 1

A stock with a file price range of ________,a final offer price of ________,and a first-day closing price of ________ is the best example of the partial adjustment phenomenon.

Accepted Answer

A) $14−$16;$15;$16 
B) $10−$12;$16;$15 
C) $16−$18;$15;$12 
D) $10−$12;$24;$24 
E) $11-$13;$22;$29 
A) $14−$16;$15;$16 
B) $10−$12;$16;$15 
C) $16−$18;$15;$12 
D) $10−$12;$24;$24 
E) $11-$13;$22;$29

Question 2

BL Lumber just authorized 5,000 new shares that is the number of shares they expect to sell over the next 2 years.These shares will be sold as,and if,funds are needed.This situation best describes which one of the following terms?

Accepted Answer

A) Shelf cash offer 
B) Timed placement 
C) Competitive firm cash offer 
D) Dutch auction 
E) Direct placement 
A) Shelf cash offer 
B) Timed placement 
C) Competitive firm cash offer 
D) Dutch auction 
E) Direct placement

Question 3

Which one of these statements is correct?

Accepted Answer

A) A decline in EPS indicates market dilution. 
B) Market dilution results from negative NPV investments. 
C) Accounting dilution causes market dilution. 
D) Accounting dilution and market dilution must be directly related. 
E) Accounting dilution causes EPS to rise. 
A) A decline in EPS indicates market dilution. 
B) Market dilution results from negative NPV investments. 
C) Accounting dilution causes market dilution. 
D) Accounting dilution and market dilution must be directly related. 
E) Accounting dilution causes EPS to rise.

Question 4

Marti owns 300 shares of ABC stock with a current value of $26 a share.The firm just issued one right for each of the 14,200 shares outstanding.The purchase of a share through the offering requires four rights plus $23.Assume Marti decides to sell her rights.All else constant,Marti will have ________ in cash and stock valued at ________ once the rights offering is completed.

Accepted Answer

A) $240;$7,740 
B) $180;$7,620 
C) $380;$7,600 
D) $60;$7,920 
E) $220;$7,760 
A) $240;$7,740 
B) $180;$7,620 
C) $380;$7,600 
D) $60;$7,920 
E) $220;$7,760

Question 5

Currently,you own 7 percent of the outstanding stock of Metals Unlimited.The firm has decided to issue additional shares of stock and has given you the first option to purchase 7 percent of those additional shares.Which one of the following will you be participating in if you opt to purchase the shares you have been offered?

Accepted Answer

A) Red herring offer 
B) Rights offer 
C) Private placement 
D) IPO 
E) General cash offer 
A) Red herring offer 
B) Rights offer 
C) Private placement 
D) IPO 
E) General cash offer

Question 6

Generally speaking,stock prices tend to ________ following a new debt announcement and ________ following a new equity announcement.

Accepted Answer

A) increase;increase 
B) increase;decrease 
C) remain steady;increase 
D) remain steady;decrease 
E) decrease;increase 
A) increase;increase 
B) increase;decrease 
C) remain steady;increase 
D) remain steady;decrease 
E) decrease;increase

Question 7

The Down Under is an all-equity firm with 210,000 shares of stock outstanding.The book value per share is $23,and the market value per share is $46.The current net income is $310,800.An expansion project will cost $1.1 million.Assume the price-earnings ratio remains constant.What must be the new total net income of the firm if the market price per share is to remain at $46?

Accepted Answer

A) $357,394 
B) $346,191 
C) $386,221 
D) $359,630 
E) $378,542 
A) $357,394 
B) $346,191 
C) $386,221 
D) $359,630 
E) $378,542

Question 8

Which one of the following is a type of underwriting of securities where the final offer price is determined by investor bids?

Accepted Answer

A) Private placement 
B) Best efforts 
C) Initial public offering 
D) Green Shoe option 
E) Dutch auction 
A) Private placement 
B) Best efforts 
C) Initial public offering 
D) Green Shoe option 
E) Dutch auction

Question 9

Ariel and Todd both own rights on TL stock that grant each of them the right to purchase 10 shares at $15 a share.Ariel does not sell or exercise her rights.Thus,Todd purchases 20 shares at the subscription price.Todd exercised

Accepted Answer

A) a neglected rights offer. 
B) a shareholder takedown offer. 
C) an oversubscription privilege. 
D) a standby fee arrangement. 
E) a standby underwriting. 
A) a neglected rights offer. 
B) a shareholder takedown offer. 
C) an oversubscription privilege. 
D) a standby fee arrangement. 
E) a standby underwriting.

Question 10

Rowyn placed an order with her broker to purchase 300 shares of each of three IPOs that are being released this month.Each IPO has an offer price of $16 a share.She received allocations of 300 shares of A,240 shares of B,and 50 shares of C.On their respective first days of trading,Stock A closed at $15 a share,Stock B closed at $16 a share,and Stock C closed at $22 a share.What is her combined total first-day profit or loss on these three IPOs?

Accepted Answer

A) −$120 
B) $0 
C) −$30 
D) $70 
E) $300 
A) −$120 
B) $0 
C) −$30 
D) $70 
E) $300

Question 11

A lockup agreement:

Accepted Answer

A) temporarily supports the market price of IPO shares. 
B) maximizes the return on an IPO to a firm's original owners. 
C) increases the volume of trading for shares of a recent IPO. 
D) limits price volatility on the first day shares of an IPO trade. 
E) guarantees a minimum number of IPO shares sold. 
A) temporarily supports the market price of IPO shares. 
B) maximizes the return on an IPO to a firm's original owners. 
C) increases the volume of trading for shares of a recent IPO. 
D) limits price volatility on the first day shares of an IPO trade. 
E) guarantees a minimum number of IPO shares sold.

Question 12

Isaac placed an order with his broker to purchase 300 shares of each of three IPOs that are being released this month.Each IPO has an offer price of $24 a share.He received allocations of 300 shares of A,25 shares of B,and 250 shares of C.On their respective first days of trading Stock A closed at $20 a share,Stock B closed at $29 a share,and Stock C closed at $25 a share.How much less did he earn on his combined first day of trading than he would have had he received his full allocation of shares for all three stocks?

Accepted Answer

A) −$1,440 
B) -$1,375 
C) -$1,500 
D) -$1,425 
E) -$1,225 
A) −$1,440 
B) -$1,375 
C) -$1,500 
D) -$1,425 
E) -$1,225

Question 13

Kurt's Campers issued 60,000 shares of stock last week,received $31.54 a share,and incurred direct costs of $328,000.The offer price was $34 a share.Within the first hour of trading,the stock price increased to $36 a share.What was the flotation cost as a percentage of the funds raised?

Accepted Answer

A) 38.07% 
B) 33.49% 
C) 27.92% 
D) 36.33% 
E) 29.04% 
A) 38.07% 
B) 33.49% 
C) 27.92% 
D) 36.33% 
E) 29.04%

Question 14

Youngwood's wants to raise funds for an expansion project by issuing new equity shares.Management estimates the issue will cost the firm $246,000 for direct issue costs.The underwriting spread is 7.75 percent and the issue price is $14 per share.The firm has determined that 266,822 shares of stock must be sold for the firm to receive sufficient funds for the expansion.What is the expansion cost?

Accepted Answer

A) $2,950,001 
B) $3,200,006 
C) $3,350,002 
D) $3,000,004 
E) $3,140,008 
A) $2,950,001 
B) $3,200,006 
C) $3,350,002 
D) $3,000,004 
E) $3,140,008

Question 15

DDP has 120,000 shares of stock outstanding at a market price per share of $52.The firm plans a rights offering of 20,000 shares with an offer price of $46 a share.What will be the ex-rights stock price if each outstanding share is granted one right?

Accepted Answer

A) $51.10 
B) $50.67 
C) $51.14 
D) $50.54 
E) $51.40 
A) $51.10 
B) $50.67 
C) $51.14 
D) $50.54 
E) $51.40

Question 16

A Green Shoe provision can be defined as a(n):

Accepted Answer

A) privileged subscription. 
B) guarantee of sale for all shares offered. 
C) overallotment option. 
D) public price auction. 
E) private price auction. 
A) privileged subscription. 
B) guarantee of sale for all shares offered. 
C) overallotment option. 
D) public price auction. 
E) private price auction.

Question 17

Newton Water Works would like to sell 500 shares of stock using a Dutch auction.The bids received were Bidder A,100 shares at $26;Bidder B,300 shares at $25;Bidder C,200 shares at $25;Bidder D,500 shares at $24;and Bidder E,800 shares at $22.Bidder D will be able to purchase ________ shares at total cost of ________.Assume allocated shares are rounded to the nearest whole share.

Accepted Answer

A) 500;$24 
B) 227;$5,675 
C) 227;$5,448 
D) 500;$25 
E) 0;$0 
A) 500;$24 
B) 227;$5,675 
C) 227;$5,448 
D) 500;$25 
E) 0;$0

Question 18

Galactic Travel wants to do an IPO but is quite concerned that the underwriters might underprice the issue.Which one of the following might the firm consider to address this concern?

Accepted Answer

A) Extended lockup period 
B) Dutch auction underwriting 
C) Extended quiet period 
D) Best efforts underwriting 
E) Standby underwriting 
A) Extended lockup period 
B) Dutch auction underwriting 
C) Extended quiet period 
D) Best efforts underwriting 
E) Standby underwriting

Question 19

Deep Hollow Oil issued 140,000 shares of stock last week,received $23.15 a share,and incurred direct costs of $287,000.The offer price was $29 a share.Within the first hour of trading,the stock price increased to $34 a share.What was the flotation cost as a percentage of the funds raised?

Accepted Answer

A) 49.72% 
B) 53.49% 
C) 64.47% 
D) 54.55% 
E) 61.14% 
A) 49.72% 
B) 53.49% 
C) 64.47% 
D) 54.55% 
E) 61.14%

Question 20

The Corner Market is offering 75,000 shares of stock to the public in a general cash offer.The offer price is $29 a share,and the underwriter's spread is 8.5 percent.The administrative costs are estimated at $360,000.How much will the company net from this stock offering assuming the issue is completely sold?

Accepted Answer

A) $2,319,525 
B) $1,546,000 
C) $1,630,125 
D) $1,610,000 
E) $2,257,048 
A) $2,319,525 
B) $1,546,000 
C) $1,630,125 
D) $1,610,000 
E) $2,257,048

A stock with a file price range of ,a final offer price of ,and a first-day closing price of is the best example of the partial adjustment phenomenon.

BL Lumber just authorized 5,000 new shares that is the number of shares they expect to sell over the next 2 years.These shares will be sold as,and if,funds are needed.This situation best describes which one of the following terms?

Which one of these statements is correct?

Generally speaking,stock prices tend to following a new debt announcement and following a new equity announcement.

Which one of the following is a type of underwriting of securities where the final offer price is determined by investor bids?

Ariel and Todd both own rights on TL stock that grant each of them the right to purchase 10 shares at $15 a share.Ariel does not sell or exercise her rights.Thus,Todd purchases 20 shares at the subscription price.Todd exercised

A lockup agreement:

Kurt's Campers issued 60,000 shares of stock last week,received $31.54 a share,and incurred direct costs of $328,000.The offer price was $34 a share.Within the first hour of trading,the stock price increased to $36 a share.What was the flotation cost as a percentage of the funds raised?

DDP has 120,000 shares of stock outstanding at a market price per share of $52.The firm plans a rights offering of 20,000 shares with an offer price of $46 a share.What will be the ex-rights stock price if each outstanding share is granted one right?

A Green Shoe provision can be defined as a(n):

Galactic Travel wants to do an IPO but is quite concerned that the underwriters might underprice the issue.Which one of the following might the firm consider to address this concern?

Deep Hollow Oil issued 140,000 shares of stock last week,received $23.15 a share,and incurred direct costs of $287,000.The offer price was $29 a share.Within the first hour of trading,the stock price increased to $34 a share.What was the flotation cost as a percentage of the funds raised?

Introduction to Corporate Finance

Financial Statements AMCQ Cash Flow

Financial Statements Analysis Amcq Financial Models

Discounted Cash Flow Valuation

Interest Rates AMCQ Bomcq Valuation

Stock Valuation

Net Present Value AMCQ Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, AMCQ Capital Budgeting

Risk Amcq Return: Lessons From Market History

Return Amcq Risk: the Capital Asset Pricing Model Capm

Risk, cost of Capital, AMCQ Valuation

Efficient Capital Markets Amcq Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividemcqs AMCQ Other Payouts

Options Amcq Corporate Finance

Short-Term Finance Amcq Planning

International Corporate Finance

Mergers Amcq Acquisitions Web Only

Filters

Exam 19: Raising Capital

A stock with a file price range of ________,a final offer price of ________,and a first-day closing price of ________ is the best example of the partial adjustment phenomenon.

BL Lumber just authorized 5,000 new shares that is the number of shares they expect to sell over the next 2 years.These shares will be sold as,and if,funds are needed.This situation best describes which one of the following terms?

Which one of these statements is correct?

Generally speaking,stock prices tend to ________ following a new debt announcement and ________ following a new equity announcement.

Which one of the following is a type of underwriting of securities where the final offer price is determined by investor bids?

Ariel and Todd both own rights on TL stock that grant each of them the right to purchase 10 shares at $15 a share.Ariel does not sell or exercise her rights.Thus,Todd purchases 20 shares at the subscription price.Todd exercised

A lockup agreement:

Kurt's Campers issued 60,000 shares of stock last week,received $31.54 a share,and incurred direct costs of $328,000.The offer price was $34 a share.Within the first hour of trading,the stock price increased to $36 a share.What was the flotation cost as a percentage of the funds raised?

DDP has 120,000 shares of stock outstanding at a market price per share of $52.The firm plans a rights offering of 20,000 shares with an offer price of $46 a share.What will be the ex-rights stock price if each outstanding share is granted one right?

A Green Shoe provision can be defined as a(n):

Galactic Travel wants to do an IPO but is quite concerned that the underwriters might underprice the issue.Which one of the following might the firm consider to address this concern?

Deep Hollow Oil issued 140,000 shares of stock last week,received $23.15 a share,and incurred direct costs of $287,000.The offer price was $29 a share.Within the first hour of trading,the stock price increased to $34 a share.What was the flotation cost as a percentage of the funds raised?

Introduction to Corporate Finance

Financial Statements AMCQ Cash Flow

Financial Statements Analysis Amcq Financial Models

Discounted Cash Flow Valuation

Interest Rates AMCQ Bomcq Valuation

Stock Valuation

Net Present Value AMCQ Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, AMCQ Capital Budgeting

Risk Amcq Return: Lessons From Market History

Return Amcq Risk: the Capital Asset Pricing Model Capm

Risk, cost of Capital, AMCQ Valuation

Efficient Capital Markets Amcq Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividemcqs AMCQ Other Payouts

Options Amcq Corporate Finance

Short-Term Finance Amcq Planning

International Corporate Finance

Mergers Amcq Acquisitions Web Only

Filters

A stock with a file price range of ,a final offer price of ,and a first-day closing price of is the best example of the partial adjustment phenomenon.

Generally speaking,stock prices tend to following a new debt announcement and following a new equity announcement.