Chapter 11: Raising long-term equity financing

Smith, Ltd recently sold 15 million shares in an IPO. The offering price was €25.50, and the underwriting spread was 8%. How much cash did the company receive?
1. €382.50 million
2. €351.90 million
3. €326.35 million
4. €421.59 million
A security offering that raises capital for firms is called a:
1. primary security issue.
2. secondary security offering.
3. prospectus.
4. none of the above.
Smith, Ltd recently raised funds in an IPO. They received €15 from the underwriter, the offering price was €18, and the market price rose to €22 on the first day of trading. What is the spread paid by Smith?
1. 20.00%
2. 13.64%
3. 16.67%
4. 12.57%
Smith Enterprises wants to conduct an IPO. The offering price of the stock is €20, the underwriter's discount is 8% and legal and other expenses are estimated to be €2,500,000. How many shares does the company have to issue to net €15,000,000?
1. 750,000
2. 825,789
3. 910,569
4. 951,087
Smith Enterprises faces costs of 15% of the amount of cash raised for an IPO. If the company needs to raise €20 million, what is the total amount of money that needs to be raised?
1. €20.000 million
2. €23.529 million
3. €23.000 million
4. €21.432 million
Bavarian Brauhaus wants to set up an ADR program for its shares
on the NYSE. Bavarian Brauhaus's shares are currently trading on the
Frankfurt Stock Exchange at €15. As it turns out, once the ADR is
listed on the NYSE, each ADR is worth two Bavarian Brauhaus shares.

If the price per share of Bavarian Brauhaus increases by €2.50 during
trading in Frankfurt, what should be the price increase per ADR when
trading begins in New York that day? Assume a $/€ exchange rate of
$1.23/€.
1. $2.50
2. $5.51
3. $3.07
4. $6.15
Bavarian Brew recently raised funds in an IPO. Bavarian Brew received €32.25 from the underwriter. The offering price was €38, and the market price dropped to €36.25 on the first day of trading. What is the underwriter's discount?
1. 15.13%
2. 17.83%
3. 11.26%
4. 19.58%
Bavarian Brew recently raised funds in an IPO. Bavarian Brew received €35 from the underwriter, the offering price was €38, and the market price rose to €42 on the first day of trading. What is the spread paid by Bavarian Brew?
1. 7.89%
2. 10.53%
3. 7.14%
4. 11.62%
Smith Enterprises wants to conduct an IPO. The offering price of the stock is €15, the underwriter's discount is 6% and legal and other expenses are estimated to be €1,500,000. How many shares does the company have to issue to net €10,000,000?
1. 666,667
2. 766,667
3. 815,603
4. 526,333
Bonds sold by foreign corporations to US investors are called:
1. Eurobonds.
2. Samurai bonds.
3. Yankee bonds.
4. Bail bonds.

Chapter 11: Raising long-term equity financing

Quiz