Corp.fin, Test 6solution

Corp.fin, Test 6solution - Test 6 Name _ 1. The first...

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Test 6 Name __________________ 1. The first public equity issue that is made by a company is referred to as: a. a rights issue. b. a general cash offer. c. an initial public offering. d. an unseasoned issue. e. Both C and D. 2. An equity issue sold to the firm's existing stockholders is called: a. a rights offer. b. a general cash offer. c. a private placement. d. an underpriced issue. e. an investment banker's issue. 3. The Wordsmith Corporation has 10,000 shares outstanding at $30 each. They expect to raise $150,000 by a rights offering with a subscription price of $25 how many rights must you turn in to get a new share? a. 0.60 b. 1.20 c. 1.67 d. 2.00 e. Insufficient data to determine. Solution : New shares = $150,000/25 = 6,000 Number of rights needed/share = 10,000/6,000 = 1.67
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4. Regional Power wants to raise $10 million in new equity. The subscription price is $20. There are currently 3 million shares outstanding, each with 1 right. How may rights are needed to purchase 1 share? a. 1 b. 3 c. 5 d. 6 e. 8 Solution : Number of new shares = Funds to be raised / subscription price= $10,000,000 / $20 = 500,000 Number of rights needed to buy 1 share = old shares/new shares = 3,000,000/500,000 = 6 5. A registration statement is effective on the 20th day after filing unless: a. the SEC is backlogged with statements. b. a tombstone ad is issued indicating its demise.
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This note was uploaded on 06/18/2010 for the course MBA MBA 5131 taught by Professor Mm during the Summer '10 term at Cumberland TN.

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Corp.fin, Test 6solution - Test 6 Name _ 1. The first...

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