Exam 15: Raising Capital

Northwest Rail wants to raise $14.2 million through a rights offering so it can purchase additional rail cars and upgrade its maintenance facilities.How many shares of stock will the firm need to sell through this offering if the current market price is $34 a share and the subscription price is $31 a share?

Executive Tours has decided to take its firm public and has hired an investment firm to handle this offering.The investment firm is serving as a(n):

Richard has an outstanding order with his stock broker to purchase 1,000 shares of every IPO.The next three IPOs are each priced at $30 a share and will all start trading on the same day.Richard is allocated 1,000 shares of IPO A,400 shares of IPO B,and 100 shares of IPO C.On the first day of trading IPO A opened at $31.50 a share and ended the day at $28.25 a share.IPO B opened at $31 a share and finished the day at $32 a share.IPO C opened at $36.50 a share and ended the day at $38.75 a share.What is Richard's total profit or loss on these three IPOs as of the end of the first day of trading?

Trevor is the CEO of Harvest Foods,which is a privately-held corporation.What is the first step he must take if he wishes to take Harvest Foods public?

What is the form called that is filed with the SEC and discloses the material information on a securities issuer when that issuer offers new securities to the general public?

The stock of Cleaner Home Products is currently selling for $26.40 a share.The company has decided to raise funds through a rights offering wherein every shareholder will receive one right for each share of stock they own.The new shares being offered are priced at $25 plus five rights.What is the value of one right?

You currently own 8 percent of the 3.5 million outstanding shares of Webster Mills.The company has just announced a rights offering with a subscription price of $28.One right will be issued for each share of outstanding stock.This offering will provided $9 million of new financing for the firm,ignoring all issue costs.Assume that all rights are exercised.What will be your new ownership position if you opted to sell your rights rather than exercise them personally?

You are a broker and have been instructed to place an order for a client to purchase 500 shares of every IPO that comes to market.The next two IPOs are each priced at $25 a share and will begin trading on the same day.The client is allocated 500 shares of IPO A and 100 shares of IPO B.At the end of the first day of trading,IPO A was selling for $23.50 a share and IPO B was selling for $29 a share.What is the client's total profit or loss on these two IPOs as of the end of the first day of trading?

Direct business loans typically ranging from one to five years are called:

Wagner Trucking is considering investing in a new project that will cost $13 million and increase net income by 6.5 percent.This project will be completely funded by issuing new equity shares.Currently,the firm has 1.25 million shares of stock outstanding with a market price of $42 per share.The current earnings per share are $1.82.What will the earnings per share be if the project is implemented?

Shares of PLS United have been selling with rights attached.Tomorrow,the stock will sell independent of these rights.Which one of the following terms applies to tomorrow in relation to this stock?

Which one of the following statements concerning venture capital financing is correct?

All new interstate security issues are regulated by the:

Which of the following have been offered as supporting arguments in favor of IPO underpricing? I.Underpricing counteracts the "winner's curse". II.Underpricing rewards institutional investors for sharing their opinions of a stock's market value. III.Underpricing diminishes the underwriting risk of a firm commitment underwriting. IV.Underpricing reduces the probability that investors will sue the underwriters.

The date on which a shareholder is officially listed as the recipient of stock rights is called the:

Franklin Minerals recently had a rights offering of 1,000 shares at an offer price of $10 a share.Isabelle is a shareholder who exercised her rights option by buying all of the rights to which she was entitled based on the number of shares she owns.Currently,there are six shareholders who have opted not to participate in the rights offering.Isabelle would like to purchase the unsubscribed shares.Which one of the following will allow her to do so?

Existing shareholders:

Pearson Electric recently registered 250,000 shares of stock under SEC Rule 415.The firm plans to sell 150,000 shares this year and the remaining 100,000 shares next year.What type of registration was this?

With Dutch auction underwriting:

Two IPOs will commence trading next week.Scott places an order to buy 300 shares of IPO A.Steve places an order to purchase 300 shares of IPO A and 300 shares of IPO B.Both IPOs are priced at $20 a share.Scott is allocated 100 shares of IPO A.Steve is allocated 100 shares of IPO A and 300 shares of IPO B.At the end of the first day of trading,IPO A is selling for $22.70 a share and IPO B is selling for $18.60 a share.What is the difference in the total profits or losses that Scott and Steve have as of the end of the first day of trading?