Practice quiz 13

What is the specialty of a venture capital firm?

Select one:

a.seeking out entrepreneurs with new profitable ideas

b.investing shareholders' money in new businesses

c.pooling funds from various sources and investing them

d.setting up joint ventures

e.borrowing money from financial institutions and lending it to new entrepreneurs

An unseasoned new issue of equity refers to

Select one:

a.the initial public offering of company.

b.the issue of new shares without a regular schedule.

c.the issue of new shares without a preliminary prospectus.

d.the issue of new shares using the POP system at the Ontario Securities Commission (OSC).

e.an underwriter buying shares from an issuing firm and selling them directly to a small number of investors.

A regular underwriting is

Select one:

a.the underwriter buying the entire issue and assuming full financial responsibility for any unsold shares.

b.the underwriter selling as much of the issue as possible without guaranteeing any particular amount of the money to the issuer.

c.one underwriter buying securities from an issuing firm and selling them directly to a small number of investors.

d.the purchase of securities from the issuing company by an investment banker for resale to the public.

e.a syndicate buying the entire issue and assuming full financial responsibility for any unsold shares.

An issue of common stock offered to existing shareholders is called a

Select one:

a.profit sharing dividend.

b.stock dividend.

c.rights offering.

d.stock split.

e.call option.

The lower the ____________, the greater is the share price _________ of a rights offering.

Select one:

a.ex-rights price; decline

b.rights-on price; decline

c.subscription price; decline

d.ex-rights price; increase

e.subscription price; increase

Yonkers Inc. is issuing new common shares in a rights offer to raise $10 million for a new project. The subscription price for each new share is $20. The firm currently has two million common shares outstanding, each priced at $25 in the market. What is the price of each right?

Select one:

a.$1

b.$2

c.$5

d.$10

e.$15

Yonkers Ltd. is issuing 500,000 new shares in a rights offer. The company wants to ensure that the ex-rights share price is $60. Before the rights offer, the company has twomillion shares outstanding. If the rights were each priced at $10, what is the subscription price?

Select one:

a.$15

b.$20

c.$25

d.$30

e.$35

Abacus Corporation needs to raise $20 million to finance its expansion into new markets. The company will sell new shares of equity via a general cash offering to raise the needed funds. If the offer price is $48 per share and the company's underwriter charges an 8% spread, how many shares need to be sold?

Select one:

a.452,899

b.571,429

c.617,143

d.621,118

e.675,128

Which of the following isnota type of dilution?

Select one:

a.dilution of percentage ownership

b.dilution of market value

c.dilution of book value

d.dilution of share price

e.dilution of earnings per share

Zanders Inc. is issuing new shares in a rights offer to raise $10 million for a new project. The subscription price for each new share is $20. The company has two million outstanding common shares and a share price of $25. If the company's investment dealer charges a 6% underwriting spread on the rights offer, what is the percentage flotation cost on the net proceeds? (Round your answer to two decimal places.)

Select one:

a.5.26%

b.6.00%

c.6.38%

d.7.32%

e.7.68%