FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 15: Raising Capital

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 1

Multiple Choice

Review LaterAdd Note

Review Later

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 B)
G) A) and D)

Correct Answer

verified

Show Answer

Question 2

Multiple Choice

Review LaterAdd Note

Review Later

The Securities and Exchange Commission:

A) verifies the accuracy of the information contained in the prospectus.
B) verifies the accuracy of the information contained in the red herring.
C) examines the registration statement during the Green Shoe period.
D) is concerned only that an issue complies with all rules and regulations.
E) determines the final offer price once they have approved the registration statement.

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

Correct Answer

verified

Show Answer

Question 3

Multiple Choice

Review LaterAdd Note

The Warm Shoe Co.has concluded that additional equity financing will be needed to expand operations and that the needed funds will be best obtained through a rights offering.It has correctly determined that as a result of the rights offering,the share price will fall from $100 to $90 ($100 is the rights-on-price; $90 is the ex-rights price,also known as the when-issued price) .The company is seeking $18 million in additional funds with a per-share subscription price of $50.How many shares of stock are outstanding,before the offering? (Assume that the increment to the market value of the equity equals the gross proceeds of the offering.)

With firm commitment underwriting,the issuing firm:

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:

What is a seasoned equity offering?

Denver Liquid Wholesalers recently offered 50,000 new shares of stock for sale.The underwriters sold a total of 53,000 shares to the public.The additional 3,000 shares were purchased in accordance with which one of the following?

Barstow Industrial Supply has decided to raise $27.52 million in additional funding via a rights offering.The firm will issue one right for each share of stock outstanding.The offering consists of a total of 860,000 new shares.The current market price of the stock is $38.Currently,there are 5.16 million shares outstanding.What is the value of one right?

If an IPO is underpriced then the:

Outdoor Living needs $7.5 million to finance modifications to its production equipment because the design of its all-season tents has changed dramatically.The underwriters estimate that the firm could sell additional shares of stock at $14.50 a share with a 7.5 percent underwriting spread.This would be a firm commitment underwriting.The estimated issue costs are $125,000.How many shares of stock will Outdoor Living need to sell to finance this project?

Firms encounter several costs when issuing new securities.Identify and describe at least four of these costs.

What is a prospectus?

Before a seasoned stock offering,you owned 7,500 shares of a firm that had 500,000 shares outstanding.After the seasoned offering,you still owned 7,500 shares but the number of shares outstanding rose to 625,000.Which one of the following terms best describes this situation?

What is an issue of securities that is offered for sale to the general public on a direct cash basis called?

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?

When a firm announces an upcoming seasoned stock offering,the market price of the firm's existing shares tends to:

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?

The total direct costs of underwriting an equity IPO:

Mountain Homes wishes to expand its facilities.The company currently has 7 million shares outstanding and no debt.The stock sells for $55 per share,but the book value per share is $43.The firm's net income is currently $9.1 million.The new facility will cost $30 million,and it will increase net income by $309,000.Assume the firm issues new equity to fund this expansion while maintaining a constant price-earnings ratio.What will be the EPS be after the new equity issue?

Atlas Corp.wants to raise $4 million via a rights offering.The company currently has 450,000 shares of common stock outstanding that sell for $40 per share.Its underwriter has set a subscription price of $24 per share and will charge the company a 7 percent spread.Assume that you currently own 7,200 shares of stock in the company and decide not to participate in the rights offering.How much can you get for selling all of your rights?