Question 1

What is the primary reason why securities are sometimes offered through a rights offering?

Accepted Answer

A)  To avoid corporate taxation of excessive profits
B)  To provide additional income to the current shareholders
C)  To assist current shareholders in maintaining their current proportional ownership position
D)  To replace a regular stock dividend
E)  To allow shareholders to avoid taxes by purchasing shares directly from the issuerF) A) and B)
G) A) and D)

Question 2

An individual who wishes to participate in crowdfunding a company must

Accepted Answer

A)  have at least 10 years of investment experience and a net worth of $500,000 or more.
B)  have a net worth of at least $1 million and net income of $200,000 or more in 2 of the last 3 years.
C)  be an SEC registered investor and have annual income of $250,000 or more.
D)  have a net worth of at least $500,000,annual net income of $200,000 or more in 2 of the last 3 years,and a minimum of 10 years of investment experience.
E)  have net income of $250,000 or more in 2 of the last 3 years along with a minimum net worth of $2 million.F) B) and C)
G) B) and E)

Question 3

Spring Aire is attempting to sell 600 shares of stock via a Dutch auction.The bids received were Bidder A,200 shares at $47;Bidder B,300 shares at $46;Bidder C,600 shares at $45;and Bidder D,500 shares at $43.How many shares will Bidder A be able to purchase?

Accepted Answer

A)  0 shares
B)  50 shares
C)  140 shares
D)  109 shares
E)  200 sharesF) C) and E)
G) None of the above

Question 4

What was the average first-day return on IPOs for the period 1980−2015 in the United States?

Accepted Answer

A)  22.7 percent
B)  17.2 percent
C)  9) 2 percent
D)  11.4 percent
E)  15.6 percentF) B) and D)
G) B) and E)

Question 5

BL Timber stock sells for $48 a share.The firm has a rights offer outstanding for new equity shares.Lisa is a current stockholder and owns 350 shares.She just received one right for every share she owns.To purchase one new share she must submit four rights and $40.What is the value of one right?

Accepted Answer

A)  $1.80
B)  $1.60
C)  $) 91
D)  $1.33
E)  $1.46F) A) and D)
G) A) and B)

Question 6

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

Accepted Answer

A)  Seasonal merchandise for a major retailer
B)  New product for an international manufacturing company
C)  Domestic outlet for a large global importer
D)  Additional warehouse space for a profitable trucking firm
E)  Prototype for a newly patented tool by an individual inventorF) B) and C)
G) A) and E)

Question 7

Disaster Cleanup stock sells for $29 a share.The firm has a rights offer outstanding for new equity shares.Antonio currently owns 400 shares.He just received one right for every share he owns.To purchase one new share he must submit five rights and $22.What is the value of one right?

Accepted Answer

A)  $1.17
B)  $1.33
C)  $) 91
D)  $) 84
E)  $1.09F) B) and D)
G) All of the above

Question 8

Arnold's Construction is an all-equity firm with 80,000 shares of stock outstanding.The book value per share is $23,and the market value per share is $50.The current net income is $216,000.The firm is considering a new project that will cost $2.6 million and will increase net income by $120,000.The project will be all-equity financed.The project will be financed with new equity shares.The current earnings per share is ________ and it will be ________ if the project is accepted.

Accepted Answer

A)  $2.60;$2.48
B)  $2.70;$2.52
C)  $2.60;$2.55
D)  $2.70;$2.55
E)  $2.70;$2.61F) B) and C)
G) A) and C)

Question 9

Which of the following have been offered as explanations of IPO underpricing? I.Underpricing helps offset the "winner's curse."
II) Underpricing helps ensure investors will be long-term holders of the IPO securities.
III) Underpricing helps ensure investment bank customers will earn a profit on average.
IV) Underpricing is needed to convince investors to accept the risks associated with IPOs.

Accepted Answer

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

Question 10

Prior to receiving SEC approval,a company selling new securities can

Accepted Answer

A)  accept both written and oral offers to purchase shares.
B)  determine the offer price and accept all offers to purchase shares.
C)  not distribute any information or communicate with any investors regarding the securities.
D)  distribute red herrings and accept oral offers to purchase shares.
E)  presell shares but cannot determine the final selling price.F) None of the above
G) D) and E)

Question 11

Which one of the following best fits the description of a private placement?

Accepted Answer

A)  3-year commercial bank loan
B)  10-year loan from an insurance company
C)  2-year direct business loan
D)  3-year loan to a firm by its original founder
E)  20-year bonds sold in the public marketsF) B) and D)
G) A) and D)

Question 12

A publicly traded company plans to issue an additional 10,000 shares of common stock to the general public in the near future.Which term applies to this issue of securities?

Accepted Answer

A)  Initial public offering
B)  Private placement
C)  In-house offering
D)  Rights offering
E)  Seasoned equity offerF) A) and B)
G) B) and C)

Question 13

A company enters a quiet period at the time it seriously considers an IPO.This period ends ________ calendar days following the IPO.

Accepted Answer

A)  1
B)  5
C)  20
D)  40
E)  50F) None of the above
G) A) and B)

Question 14

Which one of these is not a reason given for issuing shares without a rights offering?

Accepted Answer

A)  The risk of the subscription price exceeding the market price is significant.
B)  Underwriters provide a wider distribution of shares than would be possible with a rights offering.
C)  Rights must be exercised by their original owner or forfeited.
D)  Underwritten issues provide funds faster than rights offerings do.
E)  Investment bankers provide valuable advice.F) A) and B)
G) A) and C)

Question 15

Which one of these statements is correct?

Accepted Answer

A)  Equity issues must be registered with the SEC,but bond issues do not have to be registered.
B)  Less than 25 percent of debt is privately placed.
C)  Bond registration statements must indicate an indenture.
D)  Publicly issued debt generally carries a higher interest rate than privately issued debt.
E)  Term loans have a minimum maturity of 5 years.F) B) and E)
G) B) and C)

Exam 19: Raising Capital

What was the average first-day return on IPOs for the period 1980−2015 in the United States?

Correct Answer
verified

BL Timber stock sells for $48 a share.The firm has a rights offer outstanding for new equity shares.Lisa is a current stockholder and owns 350 shares.She just received one right for every share she owns.To purchase one new share she must submit four rights and $40.What is the value of one right?

Correct Answer
verified

Which one of these statements is correct?

Correct Answer
verified

Which one of the following best fits the description of a private placement?

Correct Answer
verified

A company enters a quiet period at the time it seriously considers an IPO.This period ends ________ calendar days following the IPO.

Correct Answer
verified

An individual who wishes to participate in crowdfunding a company must

Correct Answer
verified

Correct Answer
verified

What is the primary reason why securities are sometimes offered through a rights offering?

Correct Answer
verified

Prior to receiving SEC approval,a company selling new securities can

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Spring Aire is attempting to sell 600 shares of stock via a Dutch auction.The bids received were Bidder A,200 shares at $47;Bidder B,300 shares at $46;Bidder C,600 shares at $45;and Bidder D,500 shares at $43.How many shares will Bidder A be able to purchase?

Correct Answer
verified

Disaster Cleanup stock sells for $29 a share.The firm has a rights offer outstanding for new equity shares.Antonio currently owns 400 shares.He just received one right for every share he owns.To purchase one new share he must submit five rights and $22.What is the value of one right?

Correct Answer
verified

Which one of these is not a reason given for issuing shares without a rights offering?

Correct Answer
verified

A publicly traded company plans to issue an additional 10,000 shares of common stock to the general public in the near future.Which term applies to this issue of securities?

Correct Answer
verified

Exam 19: Raising Capital

What was the average first-day return on IPOs for the period 1980−2015 in the United States?

Correct AnswerverifiedShow Answer

BL Timber stock sells for $48 a share.The firm has a rights offer outstanding for new equity shares.Lisa is a current stockholder and owns 350 shares.She just received one right for every share she owns.To purchase one new share she must submit four rights and $40.What is the value of one right?

Correct AnswerverifiedShow Answer

Which one of these statements is correct?

Correct AnswerverifiedShow Answer

Which one of the following best fits the description of a private placement?

Correct AnswerverifiedShow Answer

A company enters a quiet period at the time it seriously considers an IPO.This period ends ________ calendar days following the IPO.

Correct AnswerverifiedShow Answer

An individual who wishes to participate in crowdfunding a company must

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What is the primary reason why securities are sometimes offered through a rights offering?

Correct AnswerverifiedShow Answer

Prior to receiving SEC approval,a company selling new securities can

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Spring Aire is attempting to sell 600 shares of stock via a Dutch auction.The bids received were Bidder A,200 shares at $47;Bidder B,300 shares at $46;Bidder C,600 shares at $45;and Bidder D,500 shares at $43.How many shares will Bidder A be able to purchase?

Correct AnswerverifiedShow Answer

Disaster Cleanup stock sells for $29 a share.The firm has a rights offer outstanding for new equity shares.Antonio currently owns 400 shares.He just received one right for every share he owns.To purchase one new share he must submit five rights and $22.What is the value of one right?

Correct AnswerverifiedShow Answer

Which one of these is not a reason given for issuing shares without a rights offering?

Correct AnswerverifiedShow Answer

A publicly traded company plans to issue an additional 10,000 shares of common stock to the general public in the near future.Which term applies to this issue of securities?

Correct AnswerverifiedShow Answer

Correct Answer
verified

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Correct Answer
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