Which of the following is NOT a disadvantage of going public: A. Makes it more feasible to use stock as employee incentives B. Special deals to insiders will be more difficult to undertake C. A small new issue may not be actively traded, so market-determined price may not reflect true value D. Managing investor relations is time-consuming E. Officers must disclose holdings

The majority of the proceeds of Facebooks IPO went to: A. Increase in Facebooks cash holdings B. Existing insiders C. General corporate purposes D. Increase in Facebooks working capital E. Increase in Facebooks fixed assets

Tripton Coral Corporation is considering a merger with the Frank Cement Company. Frank is a publicly traded company, and its beta is 1.30. Frank has been barely profitable, so it has paid an average of only 20% in taxes during the last several years. In addition, it uses little debt; its target ratio is just 25%, with the cost of debt 9%. If the acquisition were made, Tripton would operate Frank as a separate, wholly owned subsidiary. Tripton would pay taxes on a consolidated basis, and the tax rate would therefore increase to 35%. Tripton also would increase the debt capitalization in the Frank subsidiary to wd = 40%, or a total of $22.27 million in debt by the end of Year 4 and pay 9.5% on the debt. Triptons acquisition department estimates that Frank, if acquired, would generate the following free cash flows and interest expenses (in millions of dollars) in Years 15: Year Free Cash Flows Interest expenses 1 $1.30 $1.2 2 1.50 1.7 3 1.75 2.8 4 2.00 2.1 5 2.12 ? In Year 5, Franks interest expense would be based on its beginning-of-year (that is, the end-of-Year-4) debt, and in subsequent years both interest expense and free cash flows are projected to grow at a rate of 6%. These cash flows include all acquisition effects. Triptons cost of equity is 10.5%, its beta is 1.0, and its cost of debt is 9.5%. The risk-free rate is 6%, and the market risk premium is 4.5%. If Frank has $10 million in debt outstanding, how much maximum would Tripton be willing to pay for Frank?

A. $22.38 million B. $48.45 million C. $33.52 million D. $15.83 million E. $43.55 million