Question 1

Assume the SEC approved the registration statement for a new securities issue this morning.Which one of the following statements must be true about this issue?

Accepted Answer

A)  The red herrings can now be distributed as their distribution was awaiting the SEC approval.
B)  The waiting period started when the approval was received this morning.
C)  The final prospectuses were all delivered or the SEC would not have approved the issue.
D)  The issuer is following all of the required rules and regulations in regards to this issue.
E)  The SEC believes the issue will be a profitable investment for all purchases made at the offer price.F) A) and E)
G) B) and E)

Question 2

Individual or limited partner venture capitalists generally:

Accepted Answer

A)  seek an exit strategy.
B)  provide only seed money to start-up firms.
C)  tend to be long-term investors.
D)  are easy to contact.
E)  request less than 25 percent ownership.F) A) and D)
G) B) and D)

Question 3

A Green Shoe provision can be defined as a(n) :

Accepted Answer

A)  privileged subscription.
B)  guarantee of sale for all shares offered.
C)  overallotment option.
D)  public price auction.
E)  private price auction.F) C) and E)
G) A) and E)

Question 4

Which one of these conditions must exist if a rights offering is to be successful?

Accepted Answer

A)  The rights cannot be resold.
B)  The market price must be less than the subscription price.
C)  Shareholders must be able to obtain one new share for every right they receive.
D)  The issuer must guarantee to repurchase the rights at the offer price if the market price declines.
E)  The subscription price must be less than the market price.F) B) and C)
G) A) and E)

Question 5

Mountain View is an all-equity firm with 125,000 shares of stock outstanding.The book value per share is $9 and the market value per share is $27.The current net income is $148,750.An expansion project will cost $780,000.Assume the price-earnings ratio remains constant.What must the new net income be for the market price to remain at $27?

Accepted Answer

A)  $153,889
B)  $183,128
C)  $166,667
D)  $157,415
E)  $182,997F) A) and E)
G) A) and B)

Question 6

What was the average first-day return on IPOs for the period 1975-2012 in the U.S.?

Accepted Answer

A)  28.7 percent
B)  21.7 percent
C)  9.2 percent
D)  11.4 percent
E)  18.6 percentF) None of the above
G) B) and E)

Question 7

What is the length of the SEC registration waiting period?

Accepted Answer

A)  10 days
B)  45 days
C)  20 days
D)  90 days
E)  180 daysF) C) and E)
G) All of the above

Question 8

Which one of the following statements concerning the issuance of long-term debt is correct?

Accepted Answer

A)  Rarely is debt issued privately in the U.S.
B)  Private placements generally have shorter maturities than term loans.
C)  All U.S.debt issues,private and public,must be registered with the SEC.
D)  It is easier to renegotiate a public issue than it is a private issue of debt.
E)  A direct placement of debt generally has more restrictive covenants than a public issue.F) A) and E)
G) B) and C)

Question 9

You own 600 of the 12,000 outstanding shares of BLM stock.The firm just announced that it will be issuing an additional 3,000 shares to the general public in a cash offer at $19 per share.What type of event are you participating in if you opt to purchase 100 of these additional shares?

Accepted Answer

A)  Private placement
B)  Seasoned equity offering
C)  Dutch auction
D)  IPO
E)  Rights offerF) B) and C)
G) C) and D)

Question 10

Denver Mines is offering 45,000 shares of stock to the public in a general cash offer.The offer price is $48 a share and the underwriter's spread is 9.5 percent.The administrative costs are estimated at $360,000.How much will Denver Mines net from this stock offering assuming the issue is completely sold?

Accepted Answer

A)  $1,629,000
B)  $1,646,000
C)  $1,594,800
D)  $1,705,450
E)  $1,988,950F) A) and B)
G) B) and E)

Question 11

Which of the following have been offered as justification for stock price declines following an SEO announcement?
I.Investors assume managers issue stock when shares are overvalued.
II.Corporate taxes imposed on stock offerings lower the value of the issuer's cash flows.
III.Issuing debt may be considered a signal that the issuer has too much debt.
IV.Issue costs reduce the value of the issuing firm.

Accepted Answer

A)  I and III only
B)  II and IV only
C)  I,III,and IV only
D)  II,III,and IV only
E)  I,II,III,and IVF) D) and E)
G) All of the above

Question 12

Galactic Travel wants to do an IPO but is quite concerned that the underwriters might underprice the issue.Which one of the following might the firm consider to address this concern?

Accepted Answer

A)  Extended lockup period
B)  Dutch auction underwriting
C)  Extended quiet period
D)  Best efforts underwriting
E)  Standby underwritingF) B) and C)
G) None of the above

Question 13

Max's Outlet stock currently sells for $18 a share.The firm has a rights offer outstanding for new equity shares.To purchase one new share you must submit two rights and $15.What is the ex-rights stock price?

Accepted Answer

A)  $17.00
B)  $17.25
C)  $16.45
D)  $17.55
E)  $16.50F) B) and D)
G) D) and E)

Question 14

BL Timber stock sells for $56 a share.The firm has a rights offer outstanding for new equity shares.Lisa is a current stockholder and owns 300 shares.She just received one right for every share she owns.To purchase one new share she must submit five rights and $12.What is the value of one right?

Accepted Answer

A)  $8.80
B)  $7.33
C)  $7.91
D)  $9.33
E)  $8.46F) C) and E)
G) B) and D)

Question 15

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

Accepted Answer

A)  Underwriting cartel
B)  Syndicate
C)  Firm commitment group
D)  Dutch auction group
E)  Venture capitalistsF) B) and E)
G) A) and C)

Question 16

The specified period of time following an IPO when insiders are prevented from selling their shares is called the:

Accepted Answer

A)  lockup period.
B)  quiet period.
C)  comment period.
D)  Green Shoe period.
E)  waiting period.F) D) and E)
G) None of the above

Question 17

The Down Under is an all-equity firm with 330,000 shares of stock outstanding.The book value per share is $21 and the market value per share is $54.The current net income is $412,500.An expansion project will cost $1.6 million.Assume the price-earnings ratio remains constant.What must the new net income be for the market price to remain at $54?

Accepted Answer

A)  $427,394
B)  $449,537
C)  $386,221
D)  $359,630
E)  $478,542F) C) and E)
G) A) and D)

Question 18

The Bread Basket needs to raise $38 million to expand its operations nationally.The company will sell new shares of common stock using a general cash offering.The underwriters charge a 7.65 percent spread,the administrative costs are $395,000,and the offer price is $28 per share.How many shares of stock must be sold for The Bread Basket to receive the total funds it desires?

Accepted Answer

A)  1,484,840 shares
B)  1,638,311 shares
C)  1,663,022 shares
D)  1,814,141 shares
E)  1,833,333 sharesF) B) and D)
G) A) and B)

Question 19

Disaster Cleanup stock sells for $46 a share.The firm has a rights offer outstanding for new equity shares.Antonio is a current stockholder and owns 400 shares.He just received one right for every share he owns.To purchase one new share he must submit three rights and $15.What is the value of one right?

Accepted Answer

A)  $7.75
B)  $8.33
C)  $7.91
D)  $8.04
E)  $8.46F) C) and D)
G) A) and E)

Question 20

Zebra Stripes would like to sell 500 shares of stock using the Dutch auction method.The bids received are as follows: Bidder A: 100 shares at $26;Bidder B: 300 shares at $25: Bidder C: 200 shares at $25;and Bidder D: 500 shares at $24.What will be the gross proceeds from this auction?

Accepted Answer

A)  $27,100
B)  $13,000
C)  $12,500
D)  $14,600
E)  $12,000F) A) and B)
G) C) and D)

Exam 19: Raising Capital

Correct Answer
verified

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

Correct Answer
verified

Zebra Stripes would like to sell 500 shares of stock using the Dutch auction method.The bids received are as follows: Bidder A: 100 shares at $26;Bidder B: 300 shares at $25: Bidder C: 200 shares at $25;and Bidder D: 500 shares at $24.What will be the gross proceeds from this auction?

Correct Answer
verified

Correct Answer
verified

Which one of these conditions must exist if a rights offering is to be successful?

Correct Answer
verified

Correct Answer
verified

The specified period of time following an IPO when insiders are prevented from selling their shares is called the:

Correct Answer
verified

Max's Outlet stock currently sells for $18 a share.The firm has a rights offer outstanding for new equity shares.To purchase one new share you must submit two rights and $15.What is the ex-rights stock price?

Correct Answer
verified

Which one of the following statements concerning the issuance of long-term debt is correct?

Correct Answer
verified

A Green Shoe provision can be defined as a(n) :

Correct Answer
verified

What is the length of the SEC registration waiting period?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Assume the SEC approved the registration statement for a new securities issue this morning.Which one of the following statements must be true about this issue?

Correct Answer
verified

BL Timber stock sells for $56 a share.The firm has a rights offer outstanding for new equity shares.Lisa is a current stockholder and owns 300 shares.She just received one right for every share she owns.To purchase one new share she must submit five rights and $12.What is the value of one right?

Correct Answer
verified

Correct Answer
verified

What was the average first-day return on IPOs for the period 1975-2012 in the U.S.?

Correct Answer
verified

Individual or limited partner venture capitalists generally:

Correct Answer
verified

You own 600 of the 12,000 outstanding shares of BLM stock.The firm just announced that it will be issuing an additional 3,000 shares to the general public in a cash offer at $19 per share.What type of event are you participating in if you opt to purchase 100 of these additional shares?

Correct Answer
verified

Galactic Travel wants to do an IPO but is quite concerned that the underwriters might underprice the issue.Which one of the following might the firm consider to address this concern?

Correct Answer
verified

Exam 19: Raising Capital

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Zebra Stripes would like to sell 500 shares of stock using the Dutch auction method.The bids received are as follows: Bidder A: 100 shares at $26;Bidder B: 300 shares at $25: Bidder C: 200 shares at $25;and Bidder D: 500 shares at $24.What will be the gross proceeds from this auction?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of these conditions must exist if a rights offering is to be successful?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The specified period of time following an IPO when insiders are prevented from selling their shares is called the:

Correct AnswerverifiedShow Answer

Max's Outlet stock currently sells for $18 a share.The firm has a rights offer outstanding for new equity shares.To purchase one new share you must submit two rights and $15.What is the ex-rights stock price?

Correct AnswerverifiedShow Answer

Which one of the following statements concerning the issuance of long-term debt is correct?

Correct AnswerverifiedShow Answer

A Green Shoe provision can be defined as a(n) :

Correct AnswerverifiedShow Answer

What is the length of the SEC registration waiting period?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Assume the SEC approved the registration statement for a new securities issue this morning.Which one of the following statements must be true about this issue?

Correct AnswerverifiedShow Answer

BL Timber stock sells for $56 a share.The firm has a rights offer outstanding for new equity shares.Lisa is a current stockholder and owns 300 shares.She just received one right for every share she owns.To purchase one new share she must submit five rights and $12.What is the value of one right?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What was the average first-day return on IPOs for the period 1975-2012 in the U.S.?

Correct AnswerverifiedShow Answer

Individual or limited partner venture capitalists generally:

Correct AnswerverifiedShow Answer

You own 600 of the 12,000 outstanding shares of BLM stock.The firm just announced that it will be issuing an additional 3,000 shares to the general public in a cash offer at $19 per share.What type of event are you participating in if you opt to purchase 100 of these additional shares?

Correct AnswerverifiedShow Answer

Galactic Travel wants to do an IPO but is quite concerned that the underwriters might underprice the issue.Which one of the following might the firm consider to address this concern?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified