FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 15: Raising Capital

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 1

Multiple Choice

Review LaterAdd Note

Review Later

Which of the following functions are performed by underwriters? I.selling and distributing new securities II.determining the method used to issue the securities III.guaranteeing the payment of the offering price to the issuer if the underwriting is done on a best efforts basis IV.setting the offering price

A) II,III and IV only
B) I,II,III and IV
C) I,II and IV only
D) II and III only
E) I and IV only

F) D) and E)
G) A) and C)

Correct Answer

verified

Show Answer

Question 2

Multiple Choice

Review LaterAdd Note

Review Later

Angelina and Joe founded New Tech three years ago.Two years ago,Angelina and Joe incorporated the business and issued themselves 50 000 shares each.Last year,they took their company public in an initial public offering (IPO) by issuing an additional 100 000 shares.The offer price was $21 a share,the spread was 8 per cent,and the lock-up period was six months.The shares closed at $36 a share at the end of the first day of trading.During the first six months of trading,the shares sold in a price range of $19 to $38 a share.During the second six months of trading,the shares sold between $15 and $24 a share.Given this,which one of the following statements is correct? Ignore transaction and administrative costs.

A) Joe could have sold some of his shares for $23 a share.
B) The maximum profit that an investor who purchased the shares at the offer price could have earned thus far is $15 per share.
C) Angelina could have sold some of her shares for $38 a share.
D) The underwriters earned a spread equal to $1.50 per share.
E) The underwriters earned a profit of $15 a share on the first day of trading.

F) C) and D)
G) B) and C)

Correct Answer

verified

A

Question 3

Multiple Choice

Review LaterAdd Note

Scott placed an order with his broker to purchase 1000 shares of each of three IPOs that are being released this month.Each IPO has an offer price of $24 a share.The number of shares allocated to Scott along with the closing stock price at the end of the first day of trading for each stock,are as follows: What is Scott's total profit or loss on these three stocks as of the end of the first day of trading for each stock?

The investment firms which act as intermediaries between the issuer of securities and the general public are called:

Currently,you own 5.4 per cent of the outstanding stock of Keiffer Industries.The firm has decided to issue additional shares of stock and has given you the first option to purchase 5.4 per cent of those additional shares.Which one of the following will you be participating in if you opt to purchase the shares you have been offered?

Which of the following are valid comments regarding venture capitalists? I.Venture capitalists provide funding for high-risk ventures. II.Venture capitalists often take part in the running of the firm. III.Venture capitalists only provide secured debt. IV.Venture capitalists often provide money in stages.

A public issue of securities which are first offered to existing shareholders is best defined as a(n) :

Which of the following are true statements? I.Venture capitalists tend to be long-term investors in a firm. II.Venture capital is relatively easy to obtain for most new firms. III.Venture capitalists generally have an exit strategy. IV.Venture capitalists tend to specialise in one type of financing for a select type of firm.

Which one of the following statements related to IPO underpricing is correct?

Kendal placed an order with her broker to purchase 300 shares of each of three IPOs that are being released this month.Each IPO has an offer price of $22 a share.The number of shares allocated to Kendal,along with the closing stock price at the end of the first day of trading for each stock,are as follows: What is Kendal's total profit or loss on these three stocks as of the end of the first day of trading for each stock?

If the market price of existing publicly traded shares declines due to the announcement of a new share issue,the decline is referred to as which one of the following?

Nu Tech wants to raise $21 million to purchase equipment by issuing new securities.Management estimates the issue will cost the firm $320 000 for accounting,legal,and other costs.The underwriting fee is 7.5 per cent and the issue price is $21 per share.How many shares must be sold if Nu Tech is to receive sufficient funds to purchase all the desired equipment?

Which one of the following best describes an initial public offering?

Venture capital is most apt to be the source of funding for which one of the following?

Which one of the following is the most likely to be financed with venture capital?

Richardson Marina has 18 000 ordinary shares outstanding that were sold to the general public last year.The firm has just decided to issue an additional 6000 ordinary shares and has also decided to make the shares available to the firm's current shareholders before making any offer of these shares to the general public.Which one of the following terms best applies to this offer?

Which one of the following statements concerning IPOs and underpricing is correct?

The spread is the difference between the underwriter's purchase price and:

The founders of a new firm generally receive:

What is the group of underwriters called who share both the risks and the marketing responsibilities for a securities offering?