978-0073382395 Chapter 15 Concepts Review and Critical Thinking Questions

subject Type Homework Help
subject Pages 1
subject Words 349
subject Authors Stephen Ross

Unlock document.

This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
page-pf1
CHAPTER 15
RAISING CAPITAL
Answers to Concepts Review and Critical Thinking Questions
1. A company’s internally generated cash flow provides a source of equity financing. For a profitable
company, outside equity may never be needed. Debt issues are larger because large companies have the
2. From the previous question, economies of scale are part of the answer. Beyond this, debt issues are
simply easier and less risky to sell from an investment bank’s perspective. The two main reasons are
3. They are riskier and harder to market from an investment bank’s perspective.
4. Yields on comparable bonds can usually be readily observed, so pricing a bond issue accurately is much
less difficult.
5. It is clear that the stock was sold too cheaply, so Eyetech had reason to be unhappy.
6. No, but, in fairness, pricing the stock in such a situation is extremely difficult.
7. It’s an important factor. Only 6.5 million of the shares were underpriced. The other 32 million were, in
effect, priced completely correctly.
8. The evidence suggests that a non-underwritten rights offering might be substantially cheaper than a cash
9. He could have done worse since his access to the oversubscribed and, presumably, underpriced issues
10. a. The price will probably go up because IPOs are generally underpriced. This is especially true for
b. It is probably safe to assume that they are having trouble moving the issue, and it is likely that the

Trusted by Thousands of
Students

Here are what students say about us.

Copyright ©2022 All rights reserved. | CoursePaper is not sponsored or endorsed by any college or university.