Question 1

An equity issue that raises new funds for a publicly traded company is called ________.

Accepted Answer

A)  an initial public offering 
B)  a seasoned equity offering 
C)  an underpriced offering 
D)  a secondary offering 
A)  an initial public offering 
B)  a seasoned equity offering 
C)  an underpriced offering 
D)  a secondary offering

Question 2

The founder of a company issues 100,000 shares of series A stock for his own $250,000 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)  $2.27 million 
B)  $2.39 million 
C)  $2.52 million 
D)  $2.77 million 
A)  $2.27 million 
B)  $2.39 million 
C)  $2.52 million 
D)  $2.77 million

Question 3

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 $4 million and would receive 2 million newly issued shares in return. The post-money valuation of your firm is closest to ________.

Accepted Answer

A)  $10.0 million 
B)  $4.0 million 
C)  $9.0 million 
D)  $3.5 million 
A)  $10.0 million 
B)  $4.0 million 
C)  $9.0 million 
D)  $3.5 million

Question 4

Which of the following statements is FALSE?

Accepted Answer

A)  In recent years, the investment banking firm of WR Hambrecht + Company has attempted to change the IPO process by selling new issues directly to the public using an online auction IPO mechanism called Open IPO. 
B)  The lead underwriter is the primary banking firm responsible for managing the deal. The lead underwriter provides most of the advice and arranges for a group of other underwriters, called the syndicate, to help market and sell the issue. 
C)  Because of the potential conflict of interest, the underwriter will not make a market in the stock after the issue. 
D)  The SEC requires that companies prepare a registration statement, a legal document that provides financial and other information about the company to investors, prior to an IPO. Company managers work closely with the underwriters to prepare this registration statement and submit it to the SEC. 
A)  In recent years, the investment banking firm of WR Hambrecht + Company has attempted to change the IPO process by selling new issues directly to the public using an online auction IPO mechanism called Open IPO. 
B)  The lead underwriter is the primary banking firm responsible for managing the deal. The lead underwriter provides most of the advice and arranges for a group of other underwriters, called the syndicate, to help market and sell the issue. 
C)  Because of the potential conflict of interest, the underwriter will not make a market in the stock after the issue. 
D)  The SEC requires that companies prepare a registration statement, a legal document that provides financial and other information about the company to investors, prior to an IPO. Company managers work closely with the underwriters to prepare this registration statement and submit it to the SEC.

Question 5

Which of the following statements regarding exit strategies is FALSE?

Accepted Answer

A)  An alternative way to provide liquidity to its investors is for the company to become a publicly traded company. 
B)  An important consideration for investors in private companies is their exit strategy, or how they will eventually realize the return from their investment. 
C)  Often large corporations purchase successful start-up companies. In such a case, the acquiring company purchases the outstanding stock of the private company, allowing all investors to cash out. 
D)  Roughly 25% of venture capital exits from 2001-2005 occurred through mergers or acquisitions. 
A)  An alternative way to provide liquidity to its investors is for the company to become a publicly traded company. 
B)  An important consideration for investors in private companies is their exit strategy, or how they will eventually realize the return from their investment. 
C)  Often large corporations purchase successful start-up companies. In such a case, the acquiring company purchases the outstanding stock of the private company, allowing all investors to cash out. 
D)  Roughly 25% of venture capital exits from 2001-2005 occurred through mergers or acquisitions.

Question 6

What is the difference between preferred stocks issued by a private company and a mature company?

Accepted Answer

Preferred stock issued by a private comp

Question 7

David found 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 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%

An equity issue that raises new funds for a publicly traded company is called ________.

The founder of a company issues 100,000 shares of series A stock for his own $250,000 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?

Which of the following statements is FALSE?

Which of the following statements regarding exit strategies is FALSE?

What is the difference between preferred stocks issued by a private company and a mature company?

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

An equity issue that raises new funds for a publicly traded company is called ________.

The founder of a company issues 100,000 shares of series A stock for his own $250,000 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?

Which of the following statements is FALSE?

Which of the following statements regarding exit strategies is FALSE?

What is the difference between preferred stocks issued by a private company and a mature company?

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