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Which one of the following is a preliminary prospectus?


A) tombstone
B) green shoe
C) registration statement
D) rights offer
E) red herring

F) A) and E)
G) None of the above

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Suzie is a chemist who has been experimenting with fragrances in her home laboratory and feels that she now has three viable perfumes that could be successfully marketed.She knows a venture capitalist who has offered to finance her business to the point where she would be ready to begin the manufacturing and marketing stage.Which type of financing is Suzie being offered?


A) syndicate
B) introduction
C) second-stage
D) mezzanine-level
E) seed money

F) D) and E)
G) A) and B)

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To purchase shares in a rights offering,a shareholder generally just needs to:


A) pay the subscription amount in cash.
B) submit the required form along with the required number of rights.
C) pay the difference between the market price of the stock and the subscription price.
D) submit the required number of rights along with a payment for the underwriting fee.
E) submit the required number of rights along with the subscription price.

F) A) and B)
G) A) and C)

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Executive Tours has decided to take its firm public and has hired an investment firm to handle this offering.The investment firm is serving as a(n) :


A) aftermarket specialist.
B) venture capitalist.
C) underwriter.
D) seasoned writer.
E) primary investor.

F) All of the above
G) A) and E)

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Tony currently owns 12,000 shares of GL Tools.He has just been notified that the firm is issuing additional shares of stock and that he is being given a chance to purchase some of these shares prior to the shares being offered to the general public.What is this type of an offer called?


A) best efforts offer
B) firm commitment offer
C) general cash offer
D) rights offer
E) priority offer

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

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Soup Galore is a partnership that was formed three years ago for the purpose of creating,producing,and distributing healthy soups in a dried form.The firm has been extremely successful thus far and has decided to incorporate and offer shares of stock to the general public.What is this type of an equity offering called?


A) venture capital offering
B) shelf offering
C) private placement
D) seasoned equity offering
E) initial public offering

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

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Franklin Minerals recently had a rights offering of 1,000 shares at an offer price of $10 a share.Isabelle is a shareholder who exercised her rights option by buying all of the rights to which she was entitled based on the number of shares she owns.Currently,there are six shareholders who have opted not to participate in the rights offering.Isabelle would like to purchase the unsubscribed shares.Which one of the following will allow her to do so?


A) standby provision
B) oversubscription privilege
C) open offer privilege
D) new issues provision
E) overallotment provision

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

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Existing shareholders:


A) may or may not have a preemptive right to newly issued shares.
B) must purchase new shares whenever rights are issued.
C) are prohibited from selling their rights.
D) are generally well advised to let the rights they receive expire.
E) can maintain their proportional ownership positions without exercising their rights.

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

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Northwest Rail wants to raise $14.2 million through a rights offering so it can purchase additional rail cars and upgrade its maintenance facilities.How many shares of stock will the firm need to sell through this offering if the current market price is $34 a share and the subscription price is $31 a share?


A) 417,647 shares
B) 437,856 shares
C) 445,065 shares
D) 453,604 shares
E) 458,065 shares

F) A) and D)
G) B) and E)

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Mountain Teas wants to raise $11.6 million to open a new production center.The company estimates the issue costs including the legal and accounting fees will be $440,000.The underwriters have set the stock price at $17.50 a share and the underwriting spread at 9 percent.How many shares of stock does Mountain Teas have to sell to meet its cash need?


A) 728,414 shares
B) 756,044 shares
C) 769,315 shares
D) 772,200 shares
E) 781,909 shares

F) D) and E)
G) B) and D)

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It can be argued that the decision to accept venture capital is one of the most critical decisions an entrepreneur must make.Explain why.

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The potential rewards from venture capit...

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Which one of the following statements concerning venture capital financing is correct?


A) Venture capitalists desire shares of common stock but avoid preferred stock.
B) Venture capital is relatively easy to obtain.
C) Venture capitalists rarely assume active roles in the management of the financed firm.
D) Venture capitalists often require at least a forty percent equity position as a condition of financing.
E) Venture capital is relatively inexpensive in today's competitive markets.

F) B) and E)
G) None of the above

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Kurt currently owns 3.4 percent of Northeastern Transportation.The company has a total of 438,000 shares outstanding with a current market price of $26.20 a share.At present,the firm is offering an additional 25,000 shares at a price of $25 a share.Kurt decides not to participate in this offering.What will his ownership position be after the offering is completed?


A) 3.06 percent
B) 3.22 percent
C) 3.27 percent
D) 3.40 percent
E) 3.51 percent

F) A) and B)
G) A) and C)

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With Dutch auction underwriting:


A) each winning bidder pays the price he or she bid.
B) all successful bidders pay the same price.
C) all bidders receive at least a portion of the quantity for which they bid.
D) the selling firm receives the maximum possible price for each security sold.
E) the bidder for the largest quantity receives the first allocation of securities.

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

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Wagner Trucking is considering investing in a new project that will cost $13 million and increase net income by 6.5 percent.This project will be completely funded by issuing new equity shares.Currently,the firm has 1.25 million shares of stock outstanding with a market price of $42 per share.The current earnings per share are $1.82.What will the earnings per share be if the project is implemented?


A) $1.39
B) $1.45
C) $1.55
D) $1.62
E) $1.69

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

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D.L.Jones & Co.recently went public.The firm received $20.80 a share on the entire offer of 25,000 shares.Keeser & Co.served as the underwriter and sold 23,700 shares to the public at an offer price of $22 a share.What type of underwriting was this?


A) best efforts
B) shelf
C) over subscribed
D) private placement
E) firm commitment

F) A) and C)
G) All of the above

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A.K.Stevenson wants to raise $7.5 million through a rights offering.The subscription price is set at $24.Currently,the company has 2.1 million shares outstanding with a current market price of $25 a share.Each shareholder will receive one right for each share of stock they currently own.How many rights will be needed to purchase one new share of stock in this offering?


A) 6.40 rights
B) 6.67 rights
C) 6.72 rights
D) 6.87 rights
E) 7.00 rights

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

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The Timken Company has announced a rights offer to raise $25 million for a new journal,the Journal of Financial Excess.This journal will review potential articles after the author pays a nonrefundable reviewing fee of $2,500 per page.The stock currently sells for $48 per share,and there are 2.6 million shares outstanding.The subscription price is set at $43 per share.What is the ex-rights price per share?


A) $45.58
B) $47.09
C) $48.15
D) $48.80
E) $49.42

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

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Precise Machining is considering a rights offer.The company has determined that the ex-rights price would be $46.The current price is $53 per share,and there are 7 million shares outstanding.The rights offer would raise a total of $70 million.What is the subscription price?


A) $26.48
B) $27.06
C) $27.50
D) $28.18
E) $29.10

F) A) and B)
G) A) and E)

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Aaron's Sailboats has decided to take the company public by offering a total of 120,000 shares of common stock to the public.The firm has hired an underwriter who arranges a full commitment underwriting and suggests an initial selling price of $25 a share with a 7 percent spread.As it turns out,the underwriters only sell 97,400 shares.How much cash will Aaron's Sailboats receive from its first public offering?


A) $2,727,200
B) $3,074,400
C) $2,790,000
D) $3,360,000
E) $3,645,600

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

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