Question 1

Characteristics of crowdfunding include:

Accepted Answer

A) Raising funds from a large number of people other than accredited investors with relatively modest regulatory restrictions. 
B) Raising funds from a large number of people but it is still subject to tight regulations. 
C) Crowdfunding must be coordinated through registered companies such as Kickstarter or Indiegogo. 
D) Regulations on crowdfunding are imposed only by the federal governments in Canada and the U.S. 
E) Regulations are in place to set the minimum and maximum contributions an individual can make. 
A) Raising funds from a large number of people other than accredited investors with relatively modest regulatory restrictions. 
B) Raising funds from a large number of people but it is still subject to tight regulations. 
C) Crowdfunding must be coordinated through registered companies such as Kickstarter or Indiegogo. 
D) Regulations on crowdfunding are imposed only by the federal governments in Canada and the U.S. 
E) Regulations are in place to set the minimum and maximum contributions an individual can make. A

Question 2

As part of the registration statement,the preliminary prospectus circulates to investors before the stock is offered.This preliminary prospectus is also called a(n):

Accepted Answer

A) IPO filing. 
B) 10-K filing. 
C) blue whale. 
D) red herring. 
E) greenshoe provision. 
A) IPO filing. 
B) 10-K filing. 
C) blue whale. 
D) red herring. 
E) greenshoe provision. D

Question 3

Managers will try to protect their existing shareholders by selling new shares at a price that correctly values or overvalues their firm,leading investors to reason that the announcement of an SEO indicates that a company is over-valued.

Accepted Answer

A) True 
 B)False  True

Question 4

A situation in which the underwriter does not guarantee the stock will be sold,but instead tries to sell the stock for the best possible price is:

Accepted Answer

A) a primary offering. 
B) a secondary offering. 
C) an auction IPO. 
D) a best-efforts IPO. 
E) a firm commitment IPO. 
A) a primary offering. 
B) a secondary offering. 
C) an auction IPO. 
D) a best-efforts IPO. 
E) a firm commitment IPO.

Question 5

Northern Lights Corp.stock trades at $55 per share and there are 72 million shares outstanding.The management would like to raise $190 million in an SEO.If the underwriter charges 7% of gross proceeds,and all the shares are primary shares sold to new investors,what percentage of the company will be owned by the new investors?

Accepted Answer

A) 5.4% 
B) 5.7% 
C) 4.3% 
D) 4.6% 
E) 4.9% 
A) 5.4% 
B) 5.7% 
C) 4.3% 
D) 4.6% 
E) 4.9%

Question 6

Saskatoon Smelting sells 25 million shares of stock in an SEO,with 20 million being primary shares issued by the company and 5 million being secondary shares sold by investors in the company.At the time of the sale,the firm's stock was selling at $4.75 per share.If the underwriter charges 7% of the gross proceeds as a fee,how much money was raised in the sale?

Accepted Answer

A) $23.75 million 
B) $110.44 million 
C) $88.35 million 
D) $22.08 million 
E) $118.75 million 
A) $23.75 million 
B) $110.44 million 
C) $88.35 million 
D) $22.08 million 
E) $118.75 million

Question 7

What is the general long-run performance of an IPO?

Accepted Answer

The long-run performance,such

Question 8

What are some of the disadvantages of going public?

Accepted Answer

When investors sell their stak

Question 9

How does the total cost of issuing stock for the first time compare to the costs of other securities?

Accepted Answer

A) substantially larger than the costs for most other securities 
B) about the same as the cost for most other securities 
C) substantially less than the cost for a few other securities 
D) substantially less than the costs for most other securities 
E) it is different for every IPO 
A) substantially larger than the costs for most other securities 
B) about the same as the cost for most other securities 
C) substantially less than the cost for a few other securities 
D) substantially less than the costs for most other securities 
E) it is different for every IPO

Question 10

Yukon Gold Inc.stock trades at $37 per share and there are 18 million shares outstanding.The management would like to raise $40 million in an SEO.If the underwriter charges 5% of gross proceeds,and all the shares are primary shares sold to new investors,what percentage of the company will be owned by the new investors?

Accepted Answer

A) 5.4% 
B) 5.7% 
C) 6% 
D) 6.5% 
E) 6.8% 
A) 5.4% 
B) 5.7% 
C) 6% 
D) 6.5% 
E) 6.8%

Question 11

Hargrave Kitchen & Bath has 6 million shares outstanding at a price of $33.25 per share.The company has decided to raise capital through a rights issue.All shareholders will be issued one right per share.For every five rights held by the stockholder,they can buy one share at a price of $33.25.How much money will this raise,if all shareholders exercise their rights?

Accepted Answer

A) $30 million 
B) $33.25 million 
C) $234.4 million 
D) $39.9 million 
E) $199.5 million 
A) $30 million 
B) $33.25 million 
C) $234.4 million 
D) $39.9 million 
E) $199.5 million

Question 12

Use the table for the question(s)below.
David founds a company and goes through the investment rounds shown below:
   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 15.0.
-An IPO is offered at $9.50 per share for 7 million shares.The IPO underwriters had a spread of 7.25%.What price did the underwriters pay per share of the IPO firm?

Accepted Answer

A) $9.17 
B) $8.86 
C) $10.19 
D) $9.50 
E) $8.81 
A) $9.17 
B) $8.86 
C) $10.19 
D) $9.50 
E) $8.81

Question 13

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?

Accepted Answer

A) $17.00 
B) $17.50 
C) $17.25 
D) $16.75 
E) $18.00 
A) $17.00 
B) $17.50 
C) $17.25 
D) $16.75 
E) $18.00

Question 14

The announcement of an SEO usually raises a stock's price.

Accepted Answer

A) True 
 B)False

Question 15

Use the table for the question(s)below.
The founders and owners of a private company have funded it through the following rounds of investment:
   The owners decide to take the company public through an IPO,issuing 1 million new shares.Assuming that they successfully complete the IPO,the net income for the next year is estimated to be $5 million.The price of shares is set using average price-earnings ratios for similar businesses of 17.0.
-What portion of the company will be owned by the angel investor after the IPO?

Accepted Answer

A) 12% 
B) 16% 
C) 22% 
D) 30% 
E) 33% 
A) 12% 
B) 16% 
C) 22% 
D) 30% 
E) 33%

Question 16

Suppose you had sold the 1 million shares to the angel investor for $500,000.What would have been the post-money valuation of your shares immediately following the angel investor's investment?

Accepted Answer

A) $500,000 
B) $700,000 
C) $1.0 million 
D) $2.0 million 
E) $2.5 million 
A) $500,000 
B) $700,000 
C) $1.0 million 
D) $2.0 million 
E) $2.5 million

Question 17

Which of the following statements regarding IPOs is most accurate?

Accepted Answer

A) In an auction IPO,the underwriter purchases the entire issue at a small discount and then resells it at the offer price. 
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,called a syndicate. 
D) At an IPO,a firm returns to the public market to offer more shares. 
E) Auction IPOs are the most common type of IPO. 
A) In an auction IPO,the underwriter purchases the entire issue at a small discount and then resells it at the offer price. 
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,called a syndicate. 
D) At an IPO,a firm returns to the public market to offer more shares. 
E) Auction IPOs are the most common type of IPO.

Question 18

Which of the following statements regarding SEOs is most accurate?

Accepted Answer

A) SEO rights offers have higher costs than cash offers. 
B) The decision to raise financing externally usually implies that a firm has run out of investment opportunities. 
C) Although not as costly as IPOs,seasoned offerings are still expensive. 
D) Researchers have found that,on average,the market greets the news of an SEO with a price increase. 
E) SEOs,unlike IPOs,do not have underwriting fees. 
A) SEO rights offers have higher costs than cash offers. 
B) The decision to raise financing externally usually implies that a firm has run out of investment opportunities. 
C) Although not as costly as IPOs,seasoned offerings are still expensive. 
D) Researchers have found that,on average,the market greets the news of an SEO with a price increase. 
E) SEOs,unlike IPOs,do not have underwriting fees.

Question 19

Which of the following statements regarding angel investors is most accurate?

Accepted Answer

A) They are typically arranged as limited partnerships. 
B) For many start-ups,the first round of outside private equity financing is often obtained from them. 
C) Because their capital investment is often small relative to the amount of capital already in place at the firm,they typically receive a small equity share in the business in return for their funds. 
D) These investors are typically not acquaintances or friends of the entrepreneur. 
E) They have little influence on the business decisions of the firm. 
A) They are typically arranged as limited partnerships. 
B) For many start-ups,the first round of outside private equity financing is often obtained from them. 
C) Because their capital investment is often small relative to the amount of capital already in place at the firm,they typically receive a small equity share in the business in return for their funds. 
D) These investors are typically not acquaintances or friends of the entrepreneur. 
E) They have little influence on the business decisions of the firm.

Question 20

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?

Accepted Answer

A) $500 million 
B) $125 million 
C) $100 million 
D) $400 million 
E) $200 million 
A) $500 million 
B) $125 million 
C) $100 million 
D) $400 million 
E) $200 million

Characteristics of crowdfunding include:

As part of the registration statement,the preliminary prospectus circulates to investors before the stock is offered.This preliminary prospectus is also called a(n):

Managers will try to protect their existing shareholders by selling new shares at a price that correctly values or overvalues their firm,leading investors to reason that the announcement of an SEO indicates that a company is over-valued.

A situation in which the underwriter does not guarantee the stock will be sold,but instead tries to sell the stock for the best possible price is:

What is the general long-run performance of an IPO?

What are some of the disadvantages of going public?

How does the total cost of issuing stock for the first time compare to the costs of other securities?

The announcement of an SEO usually raises a stock's price.

Suppose you had sold the 1 million shares to the angel investor for $500,000.What would have been the post-money valuation of your shares immediately following the angel investor's investment?

Which of the following statements regarding IPOs is most accurate?

Which of the following statements regarding SEOs is most accurate?

Which of the following statements regarding angel investors is most accurate?

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

The Valuation Principle: the Foundation of Financial Decision Making

The Time Value of Money

Interest Rates

Bonds

Valuing Stocks

Investment Decision Rules

Fundamentals of Capital Budgeting

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

Determining the Cost of Capital

Risk and the Pricing of Options

Debt Financing

Capital Structure

Payout Policy

Financial Modelling and Pro Forma Analysis

Working Capital Management

Short-Term Financial Planning

Risk Management

International Corporate Finance

Leasing

Mergers and Acquisitions

Corporate Governance

Filters

Exam 14: Raising Equity Capital

Characteristics of crowdfunding include:

As part of the registration statement,the preliminary prospectus circulates to investors before the stock is offered.This preliminary prospectus is also called a(n):

Managers will try to protect their existing shareholders by selling new shares at a price that correctly values or overvalues their firm,leading investors to reason that the announcement of an SEO indicates that a company is over-valued.

A situation in which the underwriter does not guarantee the stock will be sold,but instead tries to sell the stock for the best possible price is:

What is the general long-run performance of an IPO?

What are some of the disadvantages of going public?

How does the total cost of issuing stock for the first time compare to the costs of other securities?

The announcement of an SEO usually raises a stock's price.

Suppose you had sold the 1 million shares to the angel investor for $500,000.What would have been the post-money valuation of your shares immediately following the angel investor's investment?

Which of the following statements regarding IPOs is most accurate?

Which of the following statements regarding SEOs is most accurate?

Which of the following statements regarding angel investors is most accurate?

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

The Valuation Principle: the Foundation of Financial Decision Making

The Time Value of Money

Interest Rates

Bonds

Valuing Stocks

Investment Decision Rules

Fundamentals of Capital Budgeting

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

Determining the Cost of Capital

Risk and the Pricing of Options

Debt Financing

Capital Structure

Payout Policy

Financial Modelling and Pro Forma Analysis

Working Capital Management

Short-Term Financial Planning

Risk Management

International Corporate Finance

Leasing

Mergers and Acquisitions

Corporate Governance

Filters