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Exam 15: Raising Capital

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Question 31

Multiple Choice

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NU-Tech wants to raise $11.6 million to purchase equipment by issuing new securities.Management estimates the issue will cost the firm $785,000 for accounting,legal,and other costs.The underwriting spread is 7.5 percent and the issue price is $23 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?

A) 608,010 shares
B) 521,121 shares
C) 582,139 shares
D) 647,666 shares
E) 710,333 shares

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

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Question 32

Multiple Choice

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

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 E)
G) C) and D)

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Question 33

Multiple Choice

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Caitlyn is interested in purchasing 1,500 shares of ABC,Inc.,when the shares are issued.Her broker just gave her a preliminary prospectus to review as she waits for the shares to be cleared for sale.What is the name of this prospectus?

Free Trade Partners needs to raise $24.2million to expand its operations into South America.The company will sell new shares of common stock using a general cash offering.The underwriters will charge a spread of 7.6 percent,the administrative costs will be $631,000,and the offer price will be $32 per share.How many shares of stock must be sold if the firm is to raise the funds it desires?

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?

Which statement is true?

Alicia placed an order with her broker to purchase 500 shares of each of three IPOs that are being released soon.Each IPO has an offer price of $14 a share.The number of shares allocated to her along with the closing stock price at the end of the first day of trading for each stock,are as follows: $\begin{array} { | c | c | r | } \hline \text { Stock } & \begin{array} { c } \text { Shares } \\\text { Allocated }\end{array} & \begin{array} { r } \text { End of } \\\text { Day 1 Price }\end{array} \\\hline \text { A } & 250 & \$ 16.80 \\\hline \text { B } & 500 & 14.05 \\\hline \text { C } & 500 & 12.90 \\\hline\end{array}$ What is her total profit or loss on these three stocks as of the end of the first day of trading for each stock?

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?

Which statement is correct?

Which one of the following is probably the most effective means of increasing investors' interest in an IPO?

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

An initial public offering refers to:

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

Assume the SEC approved the registration statement for a new securities issue this morning.Which one of the following statements must be true about this issue?

Who determines the offer price in a Dutch auction?

Which statement is true?

What is the advertisement,commonly found in financial newspapers,that announces a public offering of securities and provides the name of the underwriters called?

Which one of the following correctly states a qualification an issuer must meet to be qualified to use Rule 415 for shelf registration?

Which one of the following describes a Green Shoe provision?

Bressler's would like to sell 600shares of stock using the Dutch auction method.The bids received are as follows: $\begin{array} { | c | c | r | } \hline \text { Bidder } & \text { Quantity } & \text { Price } \\\hline \text { A } & 100 & \$ 18 \\\hline \text { B } & 300 & 17 \\\hline \text { C } & 400 & 16 \\\hline \text { D } & 700 & 15 \\\hline\end{array}$ Bidder A will receive _____ shares and pay a price per share of ____.Bidder C will receive no allocation.