Chapter 15 Practice

It is common for venture capitalists to receive at least ___ percent of a start-up company's equity in exchange for the venture capital.

40%

What is a seasoned equity offering?

Sale of newly issued equity shares by a publicly owned company

Poindexter is funded by a group of wealthy investors for the sole purpose of providing funding for individuals and small firms that are trying to convert their new ideas into viable products. What is this type of funding called?

Venture capital

The raising of small amounts of capital from a large number of people is known as:

crowdfunding

The value of a right depends upon the number of rights required for each new share as well as the:

market and subscription prices.

Financing of new, nonpublic companies is broadly referred to as ________ financing.

private equity

When an issuer offers new securities to the general public, it must file a(n) ________ with the SEC to disclose all material information about the issuer.

registration statement

Northwest Rail wants to raise $27.8 million through a rights offering to upgrade its rail lines. How many shares of stock need to be sold if the current market price is $30.34 per share and the subscription price is $26.50 per share?

1,049,057 (27.8*1,000,000)/26.50

Nwosa Networks needs $35.1 million to update its equipment. The underwriters set the stock price at $36.50 per share with an underwriting spread of 7.25 percent. This would be a firm commitment underwriting. The estimated issue costs are $391,000. How many shares of stock must be sold to finance this project?

1,048,362 = 36.5*(1-7.25%) = 33.85 = (35100000 + 391000) / 33.85 = 1,048,362

A rights offering in which an underwriting syndicate agrees to purchase the unsubscribed portion of an issue is called a(n) _____ underwriting.

standby