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Exam 15: Raising Capital

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Question 21

Multiple Choice

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

A) Spread
B) Direct underwriting cost
C) Underpricing
D) Direct issue cost
E) Abnormal return

F) C) and D)
G) None of the above

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Question 22

Multiple Choice

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Deep Water Marina has 12,000 shares of stock outstanding that were sold to the general public last year.The firm has just decided to issue an additional 4,000 shares and will make these shares available to the firm's current shareholders before making any offer to the general public.Which type of offer is this?

A) General cash offer
B) Rights offer
C) In-house offering
D) Private placement
E) Initial public offering

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

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Question 23

Multiple Choice

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What is the legal document called that is provided to potential investors and describes a new security offering?

Which of the following are important factors to consider when seeking a venture capitalist? I.Exit strategy II.Management style III.Personal contacts IV.Financial strength

Which statement is correct?

Marti's BBQ is offering 5,000 shares of stock to the general public on a cash basis.Which one of the following terms best applies to this offer?

Florida Farms recently offered 12,000 shares of stock for sale but received payment for only 10,500 shares since that was all the shares the underwriters could sell.What type of underwriting was this?

Which statement is correct?

Venture capital is most apt to be the source of funding for a:

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

The Green Shoe option is most apt to be exercised when an IPO is ______ and _____.

Kallie placed an order with her broker to purchase 500 shares of each of three IPOs that are being released this month.Each IPO has an offer price of $19 a share.The number of shares allocated to Kallie,along with the closing stock price at the end of the first day of trading for each stock,are as follows: $\begin{array}{c}\begin{array}{|l|}\hline\text { Stock }\\\\\hline \mathrm{A} \\\hline \mathrm{B} \\\hline \mathrm{C} \\\hline \end{array}\begin{array}{l|}\hline\text {Shares}\\\text {Allocated}\\\hline180 \\ \hline 500 \\ \hline 100\\\hline \end{array}\begin{array}{l|}\hline\text {End of}\\\text {Day 1 Price}\\\hline \$ 21.10 \\ \hline 15.50 \\ \hline 28.60 \\ \hline\end{array}\end{array}$ What is her total profit or loss on these three stocks as of the end of the first day of trading for each stock?

A lockup agreement ensures:

When issuing securities,which of the following can occur prior to receiving the approval by the SEC of a registration statement? I.Oral offer to buy shares II.Written offer to buy shares III.Final determination of the offer price IV.Distribution of a preliminary prospectus

Garden Veggies would like to sell 1,500 shares of stock using a Dutch auction.The bids received are as follows: $\begin{array} { | c | c | r | } \hline \text { Bidder } & \text { Quantity } & \text { Price } \\\hline \text { A } & 200 & \$ 39 \\\hline \text { B } & 400 & 38 \\\hline \text { C } & 600 & 37 \\\hline \text { D } & 900 & 36 \\\hline\end{array}$ What is the total amount the issuer will receive from this auction? Ignore costs.

Two companies have both announced IPOs at $16.50 per share.One of these is undervalued by $2,and the other is overvalued by $1.60,but you have no way of knowing which is which.You previously placed an order for 1,000 shares of each issue.If an issue is undervalued,it will be rationed,and only half your order will be filled.What profit do you now expect?

Which one of the following best describes a private placement?

ALC needs to raise $12 million to finance its expansion into new markets and has decided to sell new shares of equity via a general cash offering.The offer price will be $28 per share,the accounting and legal fees are expected to be $645,000,and the company's underwriters will charge a spread of 8.2 percent.How many shares need to be sold?

What is the maximum amount an investor can invest in crowdfunding issues in a 12-month period?

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