Question 1

With firm commitment underwriting,the issuing firm:

Accepted Answer

A)   is unsure of the total amount of funds it will receive until after the offering is completed.
B)   is unsure of the number of shares it will actually issue until after the offering is completed.
C)   knows exactly how many shares will be purchased by the general public during the offer period.
D)   retains the financial risk associated with unsold shares.
E)   knows up-front the amount of money it will receive from the stock offering.F) C) and D)
G) C) and E)

Question 2

Jefferson Refining is issuing a rights offering wherein every shareholder will receive one right for each share of stock they own.The new shares in this offering are priced at $19 plus 3 rights.The current market price of the stock is $23 a share.What is the value of one right?

Accepted Answer

A)   $0.25
B)   $1.00
C)   $1.25
D)   $1.50
E)   $2.00F) A) and B)
G) B) and D)

Question 3

The total direct costs of underwriting an equity IPO:

Accepted Answer

A)   tends to increase on a percentage basis as the proceeds of the IPO increase.
B)   is generally between 7 and 8 percent,regardless of the issue size.
C)   can be as high as 25 percent for small issues.
D)   excludes the gross spread.
E)   excludes both the gross spread and the underpricing cost.F) B) and E)
G) B) and C)

Question 4

Underwater Experimental is considering a project which requires the purchase of $498,000 of fixed assets.The net present value of the project is $22,500.Equity shares will be issued as the sole means of financing the project.What will the new book value per share be after the project is implemented given the following current information on the firm?

Accepted Answer

A)   $13.25
B)   $13.70
C)   $14.23
D)   $14.94
E)   $15.60F) A) and B)
G) A) and C)

Question 5

An individual investor with a small portfolio who wishes to purchase 100 shares of each IPO is more likely to receive an allocation of shares when:

Accepted Answer

A)   an IPO is substantially oversubscribed than when it is not.
B)   the knowledgeable investors feel the issue is underpriced.
C)   an IPO is severely underpriced.
D)   an IPO is undersubscribed.
E)   he or she has a standing order with the underwriter to purchase shares in every IPO handled by that underwriter.F) C) and D)
G) A) and E)

Question 6

The Motor Plant wants to raise $21.4 million through a rights offering so it can modernize its facilities.The subscription price for the offering is set at $11 a share.Currently,the company has 2.6 million shares of stock outstanding at a market price of $12.50 a share.Each shareholder will receive one right for each share of stock they own.How many rights will a shareholder need to purchase one new share of stock in this offering?

Accepted Answer

A)   1.34 rights
B)   1.52 rights
C)   1.55 rights
D)   1.60 rights
E)   1.67 rightsF) None of the above
G) A) and B)

Question 7

What is the form called that is filed with the SEC and discloses the material information on a securities issuer when that issuer offers new securities to the general public?

Accepted Answer

A)   prospectus
B)   red herring
C)   indenture
D)   public disclosure statement
E)   registration statementF) A) and B)
G) B) and C)

Question 8

Webster Electrics is offering 1,500 shares of stock in a Dutch auction.The bids include: 
How much cash will Webster Electrics receive from selling these shares? Ignore all transaction and flotation costs.

Accepted Answer

A)   $28,500
B)   $30,000
C)   $31,500
D)   $33,000
E)   $34,500F) None of the above
G) C) and E)

Question 9

Miller Fruit wants to expand its citrus grove operations.The firm estimates that it needs $8.6 million to buy land and establish its operations.Currently,the firm has 540,000 shares of stock outstanding at a market price per share of $34.80.If the firm decides to raise the needed capital through a rights offering,one right will be issued for each share of stock.The subscription price will be set at $33 a share.How many rights will a shareholder need to purchase one new share of stock in this offering?

Accepted Answer

A)   2.07 rights
B)   2.17 rights
C)   2.22 rights
D)   2.50 rights
E)   2.67 rightsF) All of the above
G) B) and C)

Question 10

Which one of the following statements is correct?

Accepted Answer

A)   The quiet period commences when a registration statement is filed with the SEC and ends on the day the IPO shares commence trading.
B)   Lockup agreements outline how oversubscribed IPO shares will be allocated.
C)   Additional IPO shares can be issued in accordance with the lockup agreement.
D)   Quiet period restrictions only apply to the issuer of new securities.
E)   A TV interview with a firm's CFO could cause a forced delay in the firm's IPO.F) C) and D)
G) A) and B)

Exam 15: Raising Capital

Jefferson Refining is issuing a rights offering wherein every shareholder will receive one right for each share of stock they own.The new shares in this offering are priced at $19 plus 3 rights.The current market price of the stock is $23 a share.What is the value of one right?

Correct Answer
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An individual investor with a small portfolio who wishes to purchase 100 shares of each IPO is more likely to receive an allocation of shares when:

Correct Answer
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With firm commitment underwriting,the issuing firm:

Correct Answer
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Which one of the following statements is correct?

Correct Answer
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Webster Electrics is offering 1,500 shares of stock in a Dutch auction.The bids include: How much cash will Webster Electrics receive from selling these shares? Ignore all transaction and flotation costs.

Correct Answer
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Correct Answer
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What is the form called that is filed with the SEC and discloses the material information on a securities issuer when that issuer offers new securities to the general public?

Correct Answer
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The total direct costs of underwriting an equity IPO:

Correct Answer
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Exam 15: Raising Capital

Jefferson Refining is issuing a rights offering wherein every shareholder will receive one right for each share of stock they own.The new shares in this offering are priced at $19 plus 3 rights.The current market price of the stock is $23 a share.What is the value of one right?

Correct AnswerverifiedShow Answer

An individual investor with a small portfolio who wishes to purchase 100 shares of each IPO is more likely to receive an allocation of shares when:

Correct AnswerverifiedShow Answer

With firm commitment underwriting,the issuing firm:

Correct AnswerverifiedShow Answer

Which one of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Webster Electrics is offering 1,500 shares of stock in a Dutch auction.The bids include: How much cash will Webster Electrics receive from selling these shares? Ignore all transaction and flotation costs.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What is the form called that is filed with the SEC and discloses the material information on a securities issuer when that issuer offers new securities to the general public?

Correct AnswerverifiedShow Answer

The total direct costs of underwriting an equity IPO:

Correct AnswerverifiedShow Answer

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