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48. What would you expect to be the market price of stock after a sold-out rights issue, if
each existing shareholder purchases one new share at $60 for each three that he or she currently
holds, and the current share price is $100?
49. What was the market price of a share of stock before a rights issue, if one share of new
stock could be purchased at $100 for every four shares that were previously owned? The stock
price after the successful rights issue was $200.
50. Which one of these terms applies to a public company offering new shares to the general
public?
51. Shelf registration was enacted to allow:
52. Which one of the following would not be included among the benefits of shelf
registration?
53. The enactment of shelf registration is likely to have increased:
54. If a corporation's management, with its superior knowledge of proposed investments,
considers a security issue to be underpriced, it may react by:
55. If a new stock offering were overpriced and could be sold, then the:
56. Issue costs for equity are higher than those for debt for all of the following reasons
except
:
57. A firm has just issued $250 million of equity which caused its stock price to drop by 3%.
Calculate the loss in value of the firm's equity given that its market value of equity was $1 billion
before the new issue.
58. Companies offering smaller security issues may prefer to issue them through a:
59. Which one of the following statements is
incorrect
concerning private placements?
60. Private placement of debt securities occurs more frequently in:
61. In return for providing funds, venture capitalists generally require:
62. Which one of the following is
least
likely to explain why entrepreneurs contribute their
personal funds to start-up projects? Their contribution:
63. What is the market value placed on a firm in which an entrepreneur invests $1 million and
a venture capitalist invests $3 million in first-stage financing for a 50% interest in the firm?
64. Second-stage financing occurs:
65. One of the primary reasons for disbursing venture capital funds in installments is to:
66. Underwriters are more likely to oversell new stock issues during:
67. Stock underwriters are:
68. When underwriters offer a firm commitment on a stock issue, they:
69. Which one of the following is correct for stock issued under a firm commitment where the
underwriter is to receive a spread of 8%?
70. An underwriter issues a firm commitment to sell 1 million shares at $20 each, including a
$2 spread. How much does the issuing firm receive if only 500,000 shares are sold?
71. Which one of the following is correct if an underwriter is selling stock to the public at $40
per share, the underwriter receives a $3 per share spread, 2 million shares are sold, and the
issuing firm receives $111 million from the underwriter?
72. Blue-sky laws exist in order to:
73. The Securities and Exchange Commission will not permit securities to be sold:
74. Prospective investors are advised of a stock's potential risks by the:
75. One strategy that appears to be used by certain underwriters to reduce the risk of
marketing a stock is to:
76. The "winner's curse" is a reminder that:
77. The direct expense of a stock issue includes the:
78. What percentage of direct expense is required to market stock if the issuer incurs $1
million in other expenses to sell 3 million shares at $40 each to an underwriter and the
underwriter sells the shares at $43 each?
79. Assume the issuer incurs $1 million in other expenses to sell 3 million shares at $40 each
to an underwriter and the underwriter sells the shares at $43 each. By the end of the first day's
trading, the issuing company's stock price had risen to $70. What is the cost of underpricing?
80. Assume the issuer incurs $1 million in other expenses to sell 3 million shares at $40 each
to an underwriter and the underwriter sells the shares at $43 each. By the end of the first day's
trading, the issuing company's stock price had risen to $70. What is the total cost of issuing the
securities?
81. Assume an issuer incurs $1 million in other expenses to sell 3 million shares at $40 each
to an underwriter and the underwriter sells the shares at $43 each. By the end of the first day's
trading, the issuing company's stock price had risen to $70. In percentage terms, how much of
the day's closing market value was absorbed by the total costs associated with the issue?
82. Stock that is sold through a rights issue:
