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Quiz: Quiz #9&10 (10 points) - Due Week 12 This Question: 1 ot 9 of 10 (1 con What role do security analysts play in monitoring? (Select the best choice below.) O A. Increase the amount of monitoring because they investigate firms. O B. Make it more difficult to monitor because they like to hype their favorite stocks. O C. Make it more difficult to monitor management because they monopolize the gathering of information. O D. No role. Click to select your answer. MacBook Air esc F2 20 688 F3 FA FG F7 @ # % 1 2 3 4 5 6 Q W E R T Y A S D F G H Z X C V BIS How can a proxy contest be used to overcome a captured board? (Select all of the choices below that apply.) A. Proxy contests are simply contested elections for directors. In a proxy contest, there are two competing slates of directors rather than just one slate proposed by the company. B. If a board has become captured or unresponsive to shareholder demands, shareholders can put their own slate of new directors up for election. C. If the dissident slate wins, then the CEO will have succeeded in placing new directors, presumably not beholden to the CEO, on the board. D. If the dissident slate wins, then shareholders will have succeeded in placing new directors, presumably not beholden to the CEO, on the board. E. If a board has become captured or unresponsive to shareholder demands, the CEO can put a slate of new directors up for election. Click to select your answer(s). MacBook AirQUIZ. QUIZ #SaTU ( 10 points) - Due Week 12 Submit Quiz This Question: 1 pt 2 of 10 (1 complete) This Quiz: 10 pts possible IQuestion Help Three years ago, you founded Outdoor Recreation, Inc., a retailer specializing in the sale of equipment and clothing for recreational activities such as camping, skiing, and hiking. So far, your company has gone through three funding rounds: Round Date Investor Shares Share Price ($) Series A Feb. 2002 You 400,000 1.00 Series B Aug. 2003 Angels 1,200,000 1.00 Series C Sept. 2004 Venture Capital 2,100,000 3.00 It is currently 2012 and you need to raise additional capital to expand your business. You have decided to take your firm public through an IPO. You would like to issue an additional 5.0 million new shares through this IPO. Assuming that your firm successfully completes its IPO, you forecast that 2012 net income will be $7.0 million. a. Your investment banker advises you that the prices of other recent IPOs have been set such that the P/E ratios based on 2007 forecasted earnings average 22.0 x . Assuming that your IPO is set at a price that implies a similar multiple, what will your IPO price per share be? b. What percent of the firm will you own after the IPO? a. Your investment banker advises you that the prices of other recent IPOs have been set such that the P/E ratios based on 2012 forecasted earnings average 22.0 x. Assuming that your IPO is set at a price that implies a similar multiple, what will your IPO price per share be? The total value of the firm at the IPO is $ million. (Round to the nearest integer.) The IPO price will be $ per share. (Round to the nearest cent.) b. What percent of the firm will you own after the IPO? You will own % of the firm. (Round to one decimal place.) ? Enter any number or expression in each of the edit fields. MacBook Air6 of 10 (1 complete) This Quiz: 10 pts pos Question Help How does a toehold help overcome the free rider problem? (Select the best choice below.) O A. Since the free riders gain the full amount of the value improvement on the shares acquired as a toehold, the free riders are likely to sell their shares to the acquirer, allowing the takeover to go forward. O B. Free riders usually acquire a toehold in order to give an incentive for an acquirer to take over the remainder of the company and provide value-added improvements. O C. Since the acquirer gains the full amount of the value improvement on the shares acquired as a toehold, a toehold provides an incentive to undertake the acquisition, even if the acquirer must pay a price equal to the with-improvement value for the rest of the shares. O D. Once the acquirer has a toehold, free riders no longer can make as much money as they would have and are more likely to tender their shares to the acquirer. ? Click to select your answer. MacBook AirQuestion Help You work for a leveraged buyout firm and are evaluating a potential buyout of UnderWater Company. UnderWater's stock price is $19 and it has 1.75 million shares outstanding. You believe that if you buy the compar and replace its management, its value will increase by 43%. You are planning on doing a leveraged buyout of UnderWater and will offer $23.75 per share for control of the company. a. Assuming you get 50% control, what will happen to the price of non-tendered shares? b. Given the answer in part (a), will shareholders tender their shares, not tender their shares, or be indifferent? c. What will your gain from the transaction be? a. Assuming you get 50% control, what will happen to the price of non-tendered shares? Share price will be $ . (Round to the nearest cent.) b. Given the answer in part (a), will shareholders tender their shares, not tender their shares, or be indifferent? (Select the best choice below.) O A. They will not want to tender their shares. O B. They will all want to tender their shares. O C. They will be indifferent. c. What will your gain from the transaction be? Gain will be $ million. (Round to two decimal places.) Click to select your answer(s). MacBook Air DIL DD A F10Question Help What inherent characteristic of corporations creates the need for a system of checks on manager behavior? (Select the best choice below.) O A. Corporate managers are by nature greedy and cannot be trusted in any way. Therefore, a system of checks, created by the Board of Directors, is normally instituted to control managerial behavior. O B. The best method of reducing conflicts of interest between shareholders and corporate managers is to allow the shareholders the ability to run the corporation themselves. It is more efficient and provides a drastic reduction in conflicts of interest. O C. The corporation allows for the separation of management and ownership. Thus, those who control the operations of the corporation and how its money is spent are not the same who have invested in the corporation. This creates a clear conflict of interest and this conflict between the investors and managers creates the need for investors to devise a system of checks on managers-the system of corporate governance. O D. There really is no need to have a system of corporate governance. If shareholders are not satisfied with the management of a company they can simply sell their shares in that company. ? Click to select your answer. MacBook Air 888 F3 F4 esc F2