Question 1

All of the following are advantages of shelf registration except:

Accepted Answer

A)  The issuing firm can avoid competition from underwriters. 
B)  Securities can be issued with short notice. 
C)  Securities can be issued in small amounts without excessive costs. 
D)  It allows the firm to take advantage of market conditions. 
A)  The issuing firm can avoid competition from underwriters. 
B)  Securities can be issued with short notice. 
C)  Securities can be issued in small amounts without excessive costs. 
D)  It allows the firm to take advantage of market conditions.

Question 2

What risk is assumed by an underwriter when issuing a firm commitment to a corporation? Will the corporation be better off with the firm commitment?

Accepted Answer

The firm commitment obligates the underw

Question 3

Why is it likely that venture capital is disbursed in installments,rather than issuing all necessary funds at once?

Accepted Answer

Venture capitalists are unlikely to issu

Question 4

LiveBetter can choose between the two following issues:
a.A public issue of $10 million face value of 10-year debt.The interest rate on the debt would be 8.5% and the debt would be issued at face value.The underwriting spread would be 1.5% and other expenses would be $80,000.
b.A private placement of $10 million face value of 10-year debt.The interest rate on the debt would be 9% and the total issuing expenses would be $30,000.
Which deal should LiveBetter choose?

Accepted Answer

Net proceeds of public issue = $10,000,0

Question 5

When underwriters are unsure of the demand for a new offering,they:

Accepted Answer

A)  reduce their spread. 
B)  undertake the issue on a firm commitment basis. 
C)  undertake the issue on a best efforts basis. 
D)  provide shelf registration for the issue. 
A)  reduce their spread. 
B)  undertake the issue on a firm commitment basis. 
C)  undertake the issue on a best efforts basis. 
D)  provide shelf registration for the issue.

Question 6

The most important function of an underwriter is to:

Accepted Answer

A)  assess the firm's capital needs. 
B)  approve the prospectus before distribution to the public. 
C)  provide private placement of the firm's debt. 
D)  buy the issue of securities from the firm and resell to the public. 
A)  assess the firm's capital needs. 
B)  approve the prospectus before distribution to the public. 
C)  provide private placement of the firm's debt. 
D)  buy the issue of securities from the firm and resell to the public.

Question 7

A firm has just issued $250 million of equity which caused its stock price to drop by 3%.Calculate the loss in value of the firm's equity given that its market value of equity was $1 billion before the new issue:

Accepted Answer

A)  $7.5 million 
B)  $30.0 million 
C)  $33.3 million 
D)  $37.5 million 
A)  $7.5 million 
B)  $30.0 million 
C)  $33.3 million 
D)  $37.5 million

Question 8

Some investors believe that the decision by management to issue equity as opposed to issuing debt is a signal that:

Accepted Answer

A)  the stock is currently undervalued. 
B)  the stock is currently overvalued. 
C)  the firm will avoid dilution of stock value. 
D)  a shelf registration of securities will occur. 
A)  the stock is currently undervalued. 
B)  the stock is currently overvalued. 
C)  the firm will avoid dilution of stock value. 
D)  a shelf registration of securities will occur.

Question 9

In regard to new issues of common stock,economists have found that the announcement of a new issue:

Accepted Answer

A)  results in the stock price falling. 
B)  causes the stock price to rise. 
C)  has no effect on the stock price. 
D)  increases the market value of the stock temporarily. 
A)  results in the stock price falling. 
B)  causes the stock price to rise. 
C)  has no effect on the stock price. 
D)  increases the market value of the stock temporarily.

Question 10

Which one of the following would not be included among the benefits of shelf registration?

Accepted Answer

A)  Reduction of lead time for security issuance 
B)  No additional registration necessary for 5 years 
C)  Issuer can take advantage of favorable conditions 
D)  Issuer can search for best underwriting terms 
A)  Reduction of lead time for security issuance 
B)  No additional registration necessary for 5 years 
C)  Issuer can take advantage of favorable conditions 
D)  Issuer can search for best underwriting terms

Question 11

Private placement of securities involves:

Accepted Answer

A)  selling only to the firm's current investors. 
B)  nondisclosure of the issuing firm's name until after the sale. 
C)  the exchange of convertible bonds for equity. 
D)  nonpublic sale of securities to a limited number of investors. 
A)  selling only to the firm's current investors. 
B)  nondisclosure of the issuing firm's name until after the sale. 
C)  the exchange of convertible bonds for equity. 
D)  nonpublic sale of securities to a limited number of investors.

Question 12

What is the market value placed on a firm in which an entrepreneur invests $1 million and a venture capitalist invests $3 million in first-stage financing for a 50% interest in the firm?

Accepted Answer

A)  $4 million 
B)  $6 million 
C)  $7 million 
D)  $8 million 
A)  $4 million 
B)  $6 million 
C)  $7 million 
D)  $8 million

Question 13

The enactment of shelf registration is likely to have increased:

Accepted Answer

A)  the cost of issuing new securities. 
B)  the profits of venture capitalists. 
C)  competition among underwriters. 
D)  the underpricing of securities. 
A)  the cost of issuing new securities. 
B)  the profits of venture capitalists. 
C)  competition among underwriters. 
D)  the underpricing of securities.

Question 14

When a public company offers shares to the general public,it does so under a(n):

Accepted Answer

A)  rights issue. 
B)  initial public offering. 
C)  shelf registration. 
D)  general cash offer. 
A)  rights issue. 
B)  initial public offering. 
C)  shelf registration. 
D)  general cash offer.

Question 15

In many countries it is common for businesses to remain privately owned.

Accepted Answer

A) True 
 B)False

Question 16

Like a general cash offering,a rights issue is an offer to buy shares made to existing and potential shareholders.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following methods may be particularly cost-effective to smaller issuers of securities?

Accepted Answer

A)  Seasoned offerings 
B)  Private placement 
C)  General cash offer 
D)  Best efforts underwriting 
A)  Seasoned offerings 
B)  Private placement 
C)  General cash offer 
D)  Best efforts underwriting

Question 18

Discuss the market's reaction to new stock issues.

Accepted Answer

It is widely believed that a large numbe

Question 19

The primary reason for an underwriters' syndication is to:

Accepted Answer

A)  monitor the actions of the different underwriters. 
B)  reduce the risk of selling a large issue. 
C)  increase the size of the spread. 
D)  avoid the scrutiny of the Securities and Exchange Commission. 
A)  monitor the actions of the different underwriters. 
B)  reduce the risk of selling a large issue. 
C)  increase the size of the spread. 
D)  avoid the scrutiny of the Securities and Exchange Commission.

Question 20

Underwriters usually play a triple role-first providing the company with procedural and financial advice,then buying the stock,and finally reselling it to the public.

Accepted Answer

A) True 
 B)False

Exam 15: How Corporations Raise Venture Capital and Issue Securities

All of the following are advantages of shelf registration except:

What risk is assumed by an underwriter when issuing a firm commitment to a corporation? Will the corporation be better off with the firm commitment?

Why is it likely that venture capital is disbursed in installments,rather than issuing all necessary funds at once?

When underwriters are unsure of the demand for a new offering,they:

The most important function of an underwriter is to:

A firm has just issued $250 million of equity which caused its stock price to drop by 3%.Calculate the loss in value of the firm's equity given that its market value of equity was $1 billion before the new issue:

Some investors believe that the decision by management to issue equity as opposed to issuing debt is a signal that:

In regard to new issues of common stock,economists have found that the announcement of a new issue:

Which one of the following would not be included among the benefits of shelf registration?

Private placement of securities involves:

What is the market value placed on a firm in which an entrepreneur invests $1 million and a venture capitalist invests $3 million in first-stage financing for a 50% interest in the firm?

The enactment of shelf registration is likely to have increased:

When a public company offers shares to the general public,it does so under a(n):

In many countries it is common for businesses to remain privately owned.

Like a general cash offering,a rights issue is an offer to buy shares made to existing and potential shareholders.

Which of the following methods may be particularly cost-effective to smaller issuers of securities?

Discuss the market's reaction to new stock issues.

The primary reason for an underwriters' syndication is to:

Underwriters usually play a triple role-first providing the company with procedural and financial advice,then buying the stock,and finally reselling it to the public.

Goals and Governance of the Corporation

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

Debt Policy

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Risk, Return, and Capital Budgeting

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Filters