Question 1

The Food Network needs to raise $16.8 million to expand its operations nationally.The company will sell new shares of common stock using a general cash offering.The underwriters spread will be 7.85 percent, the administrative costs will be $515,000, and the offer price will be $21 per share.How many shares of stock must be sold for the company to receive the expansion funds it needs?

Accepted Answer

A)  894,763 shares
B)  938,311 shares
C)  947,222 shares
D)  814,141 shares
E)  892,674 sharesF) A) and B)
G) A) and C) A

Question 2

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

Accepted Answer

A)  $10,000
B)  $10,000 per security with a maximum of ten separate securities
C)  $100,000 per security with a maximum of five separate securities
D)  $100,000
E)  $1 million spread over a maximum of ten separate securitiesF) B) and D)
G) A) and D)

Question 3

Modern Art Online is preparing to sell new shares of stock to the general public.As part of this process, the firm just filed the required paperwork with the SEC that contains the material information related to this issue of stock.What is the name associated with this paperwork?

Accepted Answer

A)  Prospectus
B)  Red herring
C)  Security agreement
D)  Comment letter
E)  Registration statementF) C) and E)
G) B) and E)

Question 4

Cross Country Movers has just gone public.Under a firm commitment agreement, the firm received $19.84 for each of the 2.12 million shares sold.The initial offering price was $24.40 per share, and the stock rose to $25 per share in the first few minutes of trading.The company paid $626,000 in legal and other direct costs and $105,000 in indirect costs.What was the flotation cost as a percentage of the funds raised?

Accepted Answer

A)  29.91 percent
B)  27.85 percent
C)  30.49 percent
D)  28.24 percent
E)  28.60 percentF) C) and D)
G) A) and B) D

Question 5

You own 400 of the 21,000 outstanding shares of DLK stock.The firm just announced that it will be issuing an additional 3,000 shares to the general public in a cash offer at $16 per share.What type of event are you participating in if you opt to purchase 100 of these additional shares?

Accepted Answer

A)  Dutch auction
B)  Seasoned equity offering
C)  Private placement
D)  IPO
E)  Rights offerF) All of the above
G) B) and E)

Question 6

The maximum amount of securities a company can issue in a 12-month period through crowdfunding is:

Accepted Answer

A)  $50,000.
B)  $50,000 the first year and up to $100,000 per year after that.
C)  $100,000 per year during the first two years and up to $500,000 any year thereafter.
D)  $1 million.
E)  $100,000 per year up to a cumulative total of $1 million in all years.F) A) and B)
G) B) and E)

Question 7

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?

Accepted Answer

A)  Spread
B)  Direct underwriting cost
C)  Underpricing
D)  Direct issue cost
E)  Abnormal returnF) A) and D)
G) B) and C)

Question 8

Which statement is correct?

Accepted Answer

A)  Rarely is debt issued privately in the U.S.
B)  All U.S.debt issues, private and public, must be registered with the SEC.
C)  Private placements generally have shorter maturities than term loans.
D)  It is easier to renegotiate a public issue than it is a private issue of debt.
E)  A direct placement of debt generally has more restrictive covenants than a public issue.F) C) and D)
G) B) and E)

Question 9

Which one of the following is an underwriting of securities where the offer price is determined by investor bids?

Accepted Answer

A)  Private placement
B)  Best efforts underwriting
C)  Initial public offering
D)  Green Shoe option
E)  Dutch auctionF) A) and E)
G) C) and D)

Question 10

Global Traders is offering 130,000 shares of stock to the public in a general cash offer.The offer price is $38 a share and the underwriter's spread is 8 percent.The administrative costs are estimated at $865,000.How much will Global Traders receive from this stock offering as net proceeds assuming the issue is completely sold?

Accepted Answer

A)  $3,370,800
B)  $3,679,800
C)  $4,490,000
D)  $4,075,000
E)  $3,828,400F) B) and D)
G) B) and C)

Question 11

What is the group of underwriters called who share both the risks and the marketing responsibilities for a securities offering?

Accepted Answer

A)  Syndicate
B)  Underwriting cartel
C)  Firm commitment group
D)  Dutch auction group
E)  Venture capitalistsF) B) and D)
G) A) and D)

Question 12

Future Technology wants to raise $15 million to purchase equipment by issuing new securities.Management estimates the issue will cost the firm $926,250 for accounting, legal, and other costs.The underwriting spread is 6 percent and the issue price is $25 per share.How many shares of stock must be sold if the firm is to have sufficient funds remaining after costs to purchase all of the desired equipment?

Accepted Answer

A)  608,010 shares
B)  521,121 shares
C)  677,713 shares
D)  647,666 shares
E)  582,139 sharesF) A) and E)
G) All of the above

Question 13

Leanne Irish Pubworks would like to sell 1,400 shares of stock using the Dutch auction method.The bids received are as follows:  Bidder B will receive _____ shares and pay a price per share of _____.

Accepted Answer

A)  884; $31
B)  1,400; $27.00
C)  455; $28.00
D)  455; $29.00
E)  700; $38.75F) None of the above
G) C) and E)

Question 14

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

Accepted Answer

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

Question 15

Which one of the following terms is defined as an underwriting for which the underwriters assume full responsibility for any unsold shares?

Accepted Answer

A)  Initial public offering
B)  Best efforts underwriting
C)  Firm commitment underwriting
D)  Rights offer
E)  Private placementF) A) and B)
G) A) and C)

Question 16

Which statement is correct?

Accepted Answer

A)  The financial market generally reacts the same to a new issue of equity as it does to a new issue of debt as long as the issuer is the same.
B)  Issuing new equity shares is always viewed by the market as a positive event.
C)  Informed managers tend to issue new securities when the existing securities are underpriced.
D)  A decline in the price of existing stock when a new issue is released is a direct cost of selling securities.
E)  A firm's existing shareholders would prefer that new securities be issued when those securities are overpriced rather than underpriced.F) B) and E)
G) A) and E)

Question 17

Hulkster Company would like to sell 700 shares of stock using the Dutch auction method.The bids received are as follows:  Bidder A will receive _____ shares and pay a price per share of ____.Bidder C will receive no allocation.

Accepted Answer

A)  0; $0
B)  75; $17
C)  233; $17
D)  187; $18
E)  100; $18F) B) and D)
G) A) and B)

Question 18

GW Underwriters retains the difference between its buying price and its offering price on new securities.What is this amount called?

Accepted Answer

A)  Markup
B)  Commission
C)  Rights price
D)  Spread
E)  OfferF) A) and E)
G) A) and D)

Question 19

The quiet period is designed to:

Accepted Answer

A)  prevent the original investors in a firm from selling their shares and destabilizing a security's price during the first six months of public trading.
B)  ensure that all potential investors have fair access to identical information.
C)  ensure that all bidders are heard in a Dutch auction.
D)  stabilize the aftermarket.
E)  silence the market so the SEC can fairly set the offer price on an IPO.F) A) and E)
G) A) and D)

Question 20

Deep Hollow Oil issued 135,000 shares of stock last week.The underwriters charged a spread of 8.05 percent in exchange for agreeing to a firm commitment.The legal and accounting fees amounted to $418,000 and the company incurred $48,000 in indirect costs.The offer price was $33 a share.Within the first hour of trading, the stock price increased to $36 a share.What was the flotation cost as a percentage of the funds raised?

Accepted Answer

A)  28.89 percent
B)  33.03 percent
C)  26.47 percent
D)  20.55 percent
E)  33.87 percentF) C) and E)
G) B) and C)

Exam 15: Raising Capital

Correct Answer
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A

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

Correct Answer
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Modern Art Online is preparing to sell new shares of stock to the general public.As part of this process, the firm just filed the required paperwork with the SEC that contains the material information related to this issue of stock.What is the name associated with this paperwork?

Correct Answer
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Correct Answer
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D

You own 400 of the 21,000 outstanding shares of DLK stock.The firm just announced that it will be issuing an additional 3,000 shares to the general public in a cash offer at $16 per share.What type of event are you participating in if you opt to purchase 100 of these additional shares?

Correct Answer
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The maximum amount of securities a company can issue in a 12-month period through crowdfunding is:

Correct Answer
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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?

Correct Answer
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Which statement is correct?

Correct Answer
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Which one of the following is an underwriting of securities where the offer price is determined by investor bids?

Correct Answer
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Correct Answer
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What is the group of underwriters called who share both the risks and the marketing responsibilities for a securities offering?

Correct Answer
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Correct Answer
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Leanne Irish Pubworks would like to sell 1,400 shares of stock using the Dutch auction method.The bids received are as follows: Bidder B will receive _ shares and pay a price per share of _.

Correct Answer
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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

Correct Answer
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E

Which one of the following terms is defined as an underwriting for which the underwriters assume full responsibility for any unsold shares?

Correct Answer
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Which statement is correct?

Correct Answer
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Hulkster Company would like to sell 700 shares of stock using the Dutch auction method.The bids received are as follows: Bidder A will receive _ shares and pay a price per share of .Bidder C will receive no allocation.

Correct Answer
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GW Underwriters retains the difference between its buying price and its offering price on new securities.What is this amount called?

Correct Answer
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The quiet period is designed to:

Correct Answer
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Correct Answer
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Exam 15: Raising Capital

Correct AnswerverifiedA

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

Correct AnswerverifiedShow Answer

Modern Art Online is preparing to sell new shares of stock to the general public.As part of this process, the firm just filed the required paperwork with the SEC that contains the material information related to this issue of stock.What is the name associated with this paperwork?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedD

You own 400 of the 21,000 outstanding shares of DLK stock.The firm just announced that it will be issuing an additional 3,000 shares to the general public in a cash offer at $16 per share.What type of event are you participating in if you opt to purchase 100 of these additional shares?

Correct AnswerverifiedShow Answer

The maximum amount of securities a company can issue in a 12-month period through crowdfunding is:

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Which statement is correct?

Correct AnswerverifiedShow Answer

Which one of the following is an underwriting of securities where the offer price is determined by investor bids?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What is the group of underwriters called who share both the risks and the marketing responsibilities for a securities offering?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Leanne Irish Pubworks would like to sell 1,400 shares of stock using the Dutch auction method.The bids received are as follows: Bidder B will receive _____ shares and pay a price per share of _____.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedE

Which one of the following terms is defined as an underwriting for which the underwriters assume full responsibility for any unsold shares?

Correct AnswerverifiedShow Answer

Which statement is correct?

Correct AnswerverifiedShow Answer

Hulkster Company would like to sell 700 shares of stock using the Dutch auction method.The bids received are as follows: Bidder A will receive _____ shares and pay a price per share of ____.Bidder C will receive no allocation.

Correct AnswerverifiedShow Answer

GW Underwriters retains the difference between its buying price and its offering price on new securities.What is this amount called?

Correct AnswerverifiedShow Answer

The quiet period is designed to:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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A

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D

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Correct Answer
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Correct Answer
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Leanne Irish Pubworks would like to sell 1,400 shares of stock using the Dutch auction method.The bids received are as follows: Bidder B will receive _ shares and pay a price per share of _.

Correct Answer
verified

Correct Answer
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E

Correct Answer
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Correct Answer
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Hulkster Company would like to sell 700 shares of stock using the Dutch auction method.The bids received are as follows: Bidder A will receive _ shares and pay a price per share of .Bidder C will receive no allocation.

Correct Answer
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