Exam 23: Raising Equity Capital

Use the information for the question(s)below. Luther Industries is in the process of selling shares of stock in an auction IPO.At the end of the bidding period,Luther's investment bank has received the following bids: -What will the offer price of these shares be if Luther is selling 1 million shares?

Which of the following statements is FALSE?

The IRR on the investment of a limited partner into Galt Ventures net of all management fees and expenses is closest to:

Use the following information to answer the question(s)below. Suppose that Galt Ventures,a venture capital firm,raised $250 million of committed capital.Each year over the 10-year life of the fund,2% of this committed capital will be used to pay Galt's management fee.As is typical in the venture capital industry,Galt will only invest $200 million (committed capital less lifetime management fees).At the end of 10 years,the investments made by the fund are worth $800 million.Galt also charges 20% carried interest on the profits of the fund (net of management fees).Assume that Galt collects the $250 of committed capital and invests $200 million of it immediately.Also assume that Galt collects all proceeds from its investments at the end of the ten year life. -The IRR on the investments made by Galt Ventures is closest to:

Which of the following statements is FALSE?

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. -The post-money valuation of your firm is closest to:

Which of the following statements regarding best efforts IPOs is FALSE?

Use the following information to answer the question(s)below. Wyatt Oil has 8 million shares outstanding and is about to issue 10 million new shares in an IPO.The IPO price has been set at $15 per share,and the underwriting spread is 6%.The IPO is a big success with investors,and the share price rises to $35 the first day of trading. -The amount that Wyatt Oil raised during the IPO is closest to:

Describe the four characteristics of IPOs that puzzle financial economists.

When referring to IPOs,what is book building?

The amount of money raised by the venture capitalists is closest to:

Aaron Inc went public at $10 per share.Aaron's investment banker charged them $0.70 per share for the IPO.This fee is called a(n):

Which of the following statements is FALSE?

When a private equity firm purchases the outstanding equity of a publicly traded firm,thereby taking the company private,the transaction is called a(n):

Luther Industries currently has 100 million shares of stock outstanding at a price of $25 per share.The company would like to raise money and has announced a rights issue.Every existing shareholder will be sent one right per share of stock that he or she owns.The company plans to require twenty rights to purchase one share at a price of $20 per share.The amount of money that Luther will raise through its rights offering is closest to:

What will the proceeds from the IPO be if Luther is selling 1.1 million shares?

Which of the following statements is FALSE?

How much money did the venture capitalists receive?

Which of the following statements is FALSE?

Which of the following statements is FALSE?