Question 1

Which of the following statements is FALSE?

Accepted Answer

A) After deciding to go public, managers of the company work with an underwriter, an investment banking firm that manages the offering and designs its structure. 
B) The shares that are sold in the IPO may either be new shares that raise new capital, known as a secondary offering, or existing shares that are sold by current shareholders (as part of their exit strategy), known as a primary offering. 
C) Many IPOs, especially the larger offerings, are managed by a group of underwriters. 
D) In an IPO, a firm offers a large block of shares for sale to the public for the first time. 
A) After deciding to go public, managers of the company work with an underwriter, an investment banking firm that manages the offering and designs its structure. 
B) The shares that are sold in the IPO may either be new shares that raise new capital, known as a secondary offering, or existing shares that are sold by current shareholders (as part of their exit strategy), known as a primary offering. 
C) Many IPOs, especially the larger offerings, are managed by a group of underwriters. 
D) In an IPO, a firm offers a large block of shares for sale to the public for the first time.

Question 2

Newly listed firms tend to perform relatively poorly in the three to five years after their IPOs.

Accepted Answer

A) True 
 B)False

Question 3

At what stage of the IPO process do senior management and the lead underwriters travel to promote the company and explain their rationale for the offer price to the underwriters' largest customers?

Accepted Answer

A) when filing with the secs 
B) after initial price range is established 
C) when managing risk 
D) when matching buyers to sellers of the stock 
A) when filing with the secs 
B) after initial price range is established 
C) when managing risk 
D) when matching buyers to sellers of the stock

Question 4

How does IPO pricing puzzle financial economists?

Accepted Answer

On average, IPOs appear to be

Question 5

Which of the following best describes a limited partnership that specializes in raising money to invest in the private equity of young firms?

Accepted Answer

A) venture capital firms 
B) institutional investors 
C) corporate investors 
D) family investors 
A) venture capital firms 
B) institutional investors 
C) corporate investors 
D) family investors

Question 6

You founded your own firm three years ago. You initially contributed $200,000 of your own money and in return you received 3 million shares of stock. Since then, you have sold an additional 2 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 4 million newly issued shares in return. Suppose you sold the2 million shares to the angel investor for $500,000. What was your percentage ownership in the company immediately following the angel investor's investment?

Accepted Answer

A) 50% 
B) 40.0% 
C) 60.0% 
D) 100% 
A) 50% 
B) 40.0% 
C) 60.0% 
D) 100%

Question 7

David found a company and goes through the investment rounds shown below: Round Source Price Number of Shares
Series A Self $0.50 325,000
Series B Angel $1.00 475,000
Series C Venture Capital $1.50 200,000
Series D Venture Capital $2.25 350,000
He decides to take the company public through an IPO, issuing 2 million new shares. Assuming that he successfully completes the IPO, the net income for the next year is estimated to be $8 million. His banker informs him that the price of shares should be set using average price-earnings ratios for similar businesses, which is 14. What share of the company will David own after the IPO?

Accepted Answer

A) 10% 
B) 13% 
C) 15% 
D) 19% 
A) 10% 
B) 13% 
C) 15% 
D) 19%

Which of the following statements is FALSE?

Newly listed firms tend to perform relatively poorly in the three to five years after their IPOs.

At what stage of the IPO process do senior management and the lead underwriters travel to promote the company and explain their rationale for the offer price to the underwriters' largest customers?

How does IPO pricing puzzle financial economists?

Which of the following best describes a limited partnership that specializes in raising money to invest in the private equity of young firms?

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

Time Value of Money: an Introduction

Time Value of Money: Valuing Cash Flow Streams

Interest Rates

Bonds

Stock Valuation

Investment Decision Rules

Fundamentals of Capital Budgeting

Stock Valuation: a Second Look

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

The Cost of Capital

Debt Financing

Capital Structure

Payout Policy

Financial Modeling and Pro Forma Analysis

Working Capital Management

Short-Term Financial Planning

Option Applications and Corporate Finance

Mergers and Acquisitions

International Corporate Finance

Leasing

Insurance and Risk Management

Corporate Governance

Filters

Exam 14: Raising Equity Capital

Which of the following statements is FALSE?

Newly listed firms tend to perform relatively poorly in the three to five years after their IPOs.

At what stage of the IPO process do senior management and the lead underwriters travel to promote the company and explain their rationale for the offer price to the underwriters' largest customers?

How does IPO pricing puzzle financial economists?

Which of the following best describes a limited partnership that specializes in raising money to invest in the private equity of young firms?

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

Time Value of Money: an Introduction

Time Value of Money: Valuing Cash Flow Streams

Interest Rates

Bonds

Stock Valuation

Investment Decision Rules

Fundamentals of Capital Budgeting

Stock Valuation: a Second Look

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

The Cost of Capital

Debt Financing

Capital Structure

Payout Policy

Financial Modeling and Pro Forma Analysis

Working Capital Management

Short-Term Financial Planning

Option Applications and Corporate Finance

Mergers and Acquisitions

International Corporate Finance

Leasing

Insurance and Risk Management

Corporate Governance

Filters