Exam 15: Raising Capital

The Timken Company has announced a rights offer to raise $25 million for a new journal,the Journal of Financial Excess.This journal will review potential articles after the author pays a nonrefundable reviewing fee of $2,500 per page.The stock currently sells for $48 per share,and there are 2.6 million shares outstanding.The subscription price is set at $43 per share.What is the ex-rights price per share?

The 40-day period following an IPO during which the SEC places restrictions on the public communications of the issuer is known as the _____ period.

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

Underwriters generally:

Which one of the following statements is correct concerning the issuance of long-term debt?

Jennifer owns 14,000 shares of Calico Clothing.Currently,there are 1.6 million shares of stock outstanding.The company has just announced a rights offering whereby 200,000 shares are being offered for sale at a subscription price of $14 a share.The current stock price is $16 a share.Assume that Jennifer sells her rights and that all rights are exercised.What percentage of the firm will Jennifer own after the rights offering?

The Motor Plant wants to raise $21.4 million through a rights offering so it can modernize its facilities.The subscription price for the offering is set at $11 a share.Currently,the company has 2.6 million shares of stock outstanding at a market price of $12.50 a share.Each shareholder will receive one right for each share of stock they own.How many rights will a shareholder need to purchase one new share of stock in this offering?

Nelson Paints recently went public by offering 65,000 shares of common stock to the public.The underwriters provided their services in a best efforts underwriting.The offering price was set at $16 a share and the gross spread was $2.After completing their sales efforts,the underwriters determined that they sold a total of 57,500 shares.How much cash did Nelson Paints receive from its IPO?

Which of the following should be considered when selecting a venture capitalist? I.level of involvement II.past experiences III.termination of funding IV.financial strength

Wear Ever is expanding and needs $12.6 million to help fund this growth.The firm estimates it can sell new shares of stock for $35 a share.It also estimates it will cost an additional $340,000 for filing and legal fees related to the stock issue.The underwriters have agreed to a 7 percent spread.How many shares of stock must Wear Ever sell if it is going to have $12.6 million available for its expansion needs?

The difference between the underwriters' cost of buying shares in a firm commitment and the offering price of those securities to the public is called the:

Mountain Teas wants to raise $11.6 million to open a new production center.The company estimates the issue costs including the legal and accounting fees will be $440,000.The underwriters have set the stock price at $17.50 a share and the underwriting spread at 9 percent.How many shares of stock does Mountain Teas have to sell to meet its cash need?

To purchase shares in a rights offering,a shareholder generally just needs to:

You own 15 percent or 13,500 shares of Printers,Etc.These shares have a total market value of $435,000.By what percentage will the total value of your investment in this firm change if the company sells an additional 10,000 shares of stock at $30 a share and you do not buy any?

Blue Stone Builders recently offered to sell 45,000 newly issued shares of stock to the public.The underwriters charged a fee of 8 percent and paid Blue Stone Builders $16.40 a share on 40,000 shares.Which one of the following terms best describes this underwriting?

Webster Electrics is offering 1,500 shares of stock in a Dutch auction.The bids include: How much cash will Webster Electrics receive from selling these shares? Ignore all transaction and flotation costs.

Jefferson Refining is issuing a rights offering wherein every shareholder will receive one right for each share of stock they own.The new shares in this offering are priced at $19 plus 3 rights.The current market price of the stock is $23 a share.What is the value of one right?

Jones & Co.is funded by a group of individual investors for the sole purpose of providing funding for individuals who are trying to convert their new ideas into viable products.What is this type of funding called?

Birds and More is considering a project which requires the purchase of $175,000 of fixed assets.The net present value of the project is $4,500.Equity shares will be issued as the sole means of financing this project.The price-earnings ratio of the project equals that of the existing firm.What will the new market value per share be after the project is implemented given the following current information on the firm?

Kurt currently owns 3.4 percent of Northeastern Transportation.The company has a total of 438,000 shares outstanding with a current market price of $26.20 a share.At present,the firm is offering an additional 25,000 shares at a price of $25 a share.Kurt decides not to participate in this offering.What will his ownership position be after the offering is completed?