Question 1

An IPO in which the underwriter purchases the entire issue at a discount and then resells it at the offer 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 2

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

Accepted Answer

A) $12.5 million 
B) $5.2 million 
C) $10.0 million 
D) $5.0 million 
E) $5.3 million 
A) $12.5 million 
B) $5.2 million 
C) $10.0 million 
D) $5.0 million 
E) $5.3 million

Question 3

The proceeds from the IPO be if Luther is selling 1.25 million shares is closest to:

Accepted Answer

A) $20.6 million 
B) $21.6 million 
C) $21.1 million 
D) $20.9 million 
E) $21.5 million 
A) $20.6 million 
B) $21.6 million 
C) $21.1 million 
D) $20.9 million 
E) $21.5 million

Question 4

Niagara Novelty Stores stock trades at $46 per share and there are 34 million shares outstanding.The management would like to raise $150 million in an SEO and current investors would like to sell $30 million of their own stock.If the underwriter charges 6% of gross proceeds,how many shares must it sell in the total (primary and secondary)offering?

Accepted Answer

A) 3.69 million 
B) 3.26 million 
C) 3.47 million 
D) 4.16 million 
E) 3.91 million 
A) 3.69 million 
B) 3.26 million 
C) 3.47 million 
D) 4.16 million 
E) 3.91 million

Question 5

Melanie founded her company using $250,000 of her own money,issuing herself 100,000 shares of stock.An angel investor bought an additional 50,000 shares for $350,000.She now sells another 190,000 shares to a venture capitalist for $750,000.What percentage of the firm does Melanie now own?

Accepted Answer

A) 33% 
B) 19% 
C) 29% 
D) 50% 
E) 38% 
A) 33% 
B) 19% 
C) 29% 
D) 50% 
E) 38%

Question 6

What advantages do venture capital firms offer limited partners compared to investing directly in start-ups themselves as angel investors?

Accepted Answer

Because venture capital firms

Question 7

The offer price of shares in an IPO is generally less than the price those shares sell for at the end of the first trading day.Which of the following parties suffer most from this situation?

Accepted Answer

A) the buyers of shares after the initial offering 
B) the underwriters of the IPO 
C) the pre-IPO shareholders of the issuing firm 
D) the lead underwriter of the IPO 
E) the buyers of the shares at the end of the first trading day 
A) the buyers of shares after the initial offering 
B) the underwriters of the IPO 
C) the pre-IPO shareholders of the issuing firm 
D) the lead underwriter of the IPO 
E) the buyers of the shares at the end of the first trading day

Question 8

Use the table for the question(s)below.
Jeremy founded a company.He issues 200,000 shares of series A stock for his own $100,000 investment.He then goes through three further rounds of investment,as shown below:
  
-What is the post-money valuation for the series D funding round?

Accepted Answer

A) $1.4 million 
B) $1.95 million 
C) $2.025 million 
D) $2.85 million 
E) $3.15 million 
A) $1.4 million 
B) $1.95 million 
C) $2.025 million 
D) $2.85 million 
E) $3.15 million

Question 9

After the venture capitalist's investment,the post-money valuation of the angel investor's shares are closest to:

Accepted Answer

A) $12.5 million 
B) $4.0 million 
C) $5.0 million 
D) $2.5 million 
E) $1.0 million 
A) $12.5 million 
B) $4.0 million 
C) $5.0 million 
D) $2.5 million 
E) $1.0 million

Question 10

After the venture capitalist's investment,the post-money valuation of your shares are closest to:

Accepted Answer

A) $5.0 million 
B) $12.5 million 
C) $4.0 million 
D) $2.5 million 
E) $200,000 
A) $5.0 million 
B) $12.5 million 
C) $4.0 million 
D) $2.5 million 
E) $200,000

Question 11

How many types of seasoned equity offerings are there?

Accepted Answer

There are two kinds of seasoned equity o

Question 12

Ontario Operating Systems sells 20 million shares of stock in an SEO,with 15 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 $34 per share.If the underwriter charges 6% of the gross proceeds as a fee,how much money was raised in the sale?

Accepted Answer

A) $639.5 million 
B) $479.4 million 
C) $160 million 
D) $170 million 
E) $510 million 
A) $639.5 million 
B) $479.4 million 
C) $160 million 
D) $170 million 
E) $510 million

Question 13

Why do most people launching a start-up company acquire their funds through the venture capital industry rather than through angel investors?

Accepted Answer

A) Most entrepreneurs are not willing to relinquish the control of their business demanded by angel investors. 
B) Most entrepreneurs do not want the fees associated with investment by an angel investor. 
C) Most entrepreneurs do not need the expertise brought to a young firm by an angel investor. 
D) Most entrepreneurs do not have any relationships with individuals with substantial capital to invest. 
E) Most entrepreneurs do not want to work with angel investors. 
A) Most entrepreneurs are not willing to relinquish the control of their business demanded by angel investors. 
B) Most entrepreneurs do not want the fees associated with investment by an angel investor. 
C) Most entrepreneurs do not need the expertise brought to a young firm by an angel investor. 
D) Most entrepreneurs do not have any relationships with individuals with substantial capital to invest. 
E) Most entrepreneurs do not want to work with angel investors.

Question 14

A firm's founder sells equity to outside investors for the first time in the form of preferred stock.In what way is this preferred stock most likely to differ from the preferred stock issued by an established public firm?

Accepted Answer

A) It will have a larger dividend. 
B) It will most likely not pay cash dividends. 
C) It will give the holder seniority in any liquidation of the company. 
D) It cannot be converted into common stock. 
E) It will not have special voting rights. 
A) It will have a larger dividend. 
B) It will most likely not pay cash dividends. 
C) It will give the holder seniority in any liquidation of the company. 
D) It cannot be converted into common stock. 
E) It will not have special voting rights.

Question 15

Nature's Bounty,an organic seed company,is seeking to grow from a small company selling seeds in local markets into a company that sells seeds across several states.The funding for this expansion comes from a wealthy individual who uses his considerable inherited wealth to fund a variety of eco-friendly businesses.Which of the following best describes this individual's relationship with Nature's Bounty?

Accepted Answer

A) an angel investor 
B) a venture capitalist 
C) an institutional investor 
D) a corporate investor 
E) a sovereign wealth fund 
A) an angel investor 
B) a venture capitalist 
C) an institutional investor 
D) a corporate investor 
E) a sovereign wealth fund

Question 16

Equity investors in a private company usually plan to realize a return on their investment by selling their stock when that company is acquired by another firm or sold to the public in a public offering.

Accepted Answer

A) True 
 B)False

Question 17

A cash offer differs from a rights offer in that in the latter shares are offered to both existing shareholders and investors at large.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements regarding stock issues is most accurate?

Accepted Answer

A) The preferred stock issued by young companies typically pays regular cash dividends. 
B) The preferred stock issued by young companies usually gives the owner an option to convert it to common stock on some future date,so it is often called callable preferred stock. 
C) If the company runs into financial difficulties,the preferred stockholders have a senior claim on the assets of the firm relative to any common stockholders. 
D) Preferred stock issued by mature companies such as banks usually has no dividend. 
E) When a company founder decides to sell equity to outside investors for the first time,it is common practice for private companies to issue common stock to raise capital. 
A) The preferred stock issued by young companies typically pays regular cash dividends. 
B) The preferred stock issued by young companies usually gives the owner an option to convert it to common stock on some future date,so it is often called callable preferred stock. 
C) If the company runs into financial difficulties,the preferred stockholders have a senior claim on the assets of the firm relative to any common stockholders. 
D) Preferred stock issued by mature companies such as banks usually has no dividend. 
E) When a company founder decides to sell equity to outside investors for the first time,it is common practice for private companies to issue common stock to raise capital.

Question 19

Which of the following statements regarding selling shares to the public is most accurate?

Accepted Answer

A) The process of selling stock to the public for the first time is called a seasoned equity offering (SEO). 
B) Public companies typically have access to much larger amounts of capital through the public markets. 
C) By going public,companies prevent their private equity investors from diversifying. 
D) An IPO is typically the last time a company needs to raise capital from the public markets. 
E) Going public gives current shareholders less liquidity for their shares. 
A) The process of selling stock to the public for the first time is called a seasoned equity offering (SEO). 
B) Public companies typically have access to much larger amounts of capital through the public markets. 
C) By going public,companies prevent their private equity investors from diversifying. 
D) An IPO is typically the last time a company needs to raise capital from the public markets. 
E) Going public gives current shareholders less liquidity for their shares.

Question 20

Which of the following best describes a firm commitment IPO?

Accepted Answer

A) The underwriter purchases the entire issue at a small discount and then resells it at the offer price. 
B) The underwriter sells new issues directly to the public in an online auction. 
C) The underwriter tries to sell the stock for the best possible price but does not guarantee that the stock will be sold. 
D) The underwriter solicits bids from investors and chooses the highest price at which there is sufficient demand to sell the entire issue. 
E) The underwriter sets a deliberately low price to ensure the entire issue is sold. 
A) The underwriter purchases the entire issue at a small discount and then resells it at the offer price. 
B) The underwriter sells new issues directly to the public in an online auction. 
C) The underwriter tries to sell the stock for the best possible price but does not guarantee that the stock will be sold. 
D) The underwriter solicits bids from investors and chooses the highest price at which there is sufficient demand to sell the entire issue. 
E) The underwriter sets a deliberately low price to ensure the entire issue is sold.

Exam 14: Raising Equity Capital

An IPO in which the underwriter purchases the entire issue at a discount and then resells it at the offer price is:

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

The proceeds from the IPO be if Luther is selling 1.25 million shares is closest to:

Melanie founded her company using $250,000 of her own money,issuing herself 100,000 shares of stock.An angel investor bought an additional 50,000 shares for $350,000.She now sells another 190,000 shares to a venture capitalist for $750,000.What percentage of the firm does Melanie now own?

What advantages do venture capital firms offer limited partners compared to investing directly in start-ups themselves as angel investors?

The offer price of shares in an IPO is generally less than the price those shares sell for at the end of the first trading day.Which of the following parties suffer most from this situation?

Use the table for the question(s)below. Jeremy founded a company.He issues 200,000 shares of series A stock for his own $100,000 investment.He then goes through three further rounds of investment,as shown below: -What is the post-money valuation for the series D funding round?

After the venture capitalist's investment,the post-money valuation of the angel investor's shares are closest to:

After the venture capitalist's investment,the post-money valuation of your shares are closest to:

How many types of seasoned equity offerings are there?

Why do most people launching a start-up company acquire their funds through the venture capital industry rather than through angel investors?

A firm's founder sells equity to outside investors for the first time in the form of preferred stock.In what way is this preferred stock most likely to differ from the preferred stock issued by an established public firm?

Equity investors in a private company usually plan to realize a return on their investment by selling their stock when that company is acquired by another firm or sold to the public in a public offering.

A cash offer differs from a rights offer in that in the latter shares are offered to both existing shareholders and investors at large.

Which of the following statements regarding stock issues is most accurate?

Which of the following statements regarding selling shares to the public is most accurate?

Which of the following best describes a firm commitment IPO?

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