Exam 1

Rate of return where npv = 0

IRR

The profitability index is most closely related to:

NPV

Cheung Software has decided to go public and has hired an investment firm to handle the offering. The investment firm's role is to be a(n):

underwriter

When selecting a venture capitalist, what characteristics is probably the least important?

underwriting experience

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

When do we accept a project based on profitability index

when it's greater than 1

What is a seasoned equity offering?

Sale of newly issued equity shares by a publicly owned company

What is a key consideration when selecting a venture capitalist?

exit strategy

Solanki Partners has been extremely successful during its three years of existence. The owners have decided to incorporate and offer shares of stock to the general public. What is this type of an equity offering called?

Initial Public Offering

What is correct about venture capital financing?

Venture capitalists should have key contacts and financial strength.

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

crowdfunding

Scenario analysis is defined as the:

determination of changes in NPV estimates when what-if questions are posed

The main focus of sensitivity analysis is to:

determine the one variable that has the highest level of risk.

Shivani owns 300 shares of Dunning Streetwear, Incorporated. She has opted not to participate in the current rights offering by this company. As a result, Shivani will most likely experience:

dilution

A syndicate can best be defined as a:

group of underwriters sharing the risk of selling a new issue of securities.

When do we accept a project based on Payback period

if the payback period is less than a set time (given)

What combination would increase the contribution margin?

increasing the sales price and decreasing the variable cost per unit

when do you accept a project based on IRR

irr is greater than required return

If a firm accepts Project X it will not be feasible to also accept Project Z because both projects would require the simultaneous and exclusive use of the same piece of machinery. These projects are considered to be:

mutually exclusive

By definition, which one of the following must equal 0 at the accounting break-even point?

net income

When do you accept a project based on NPV

npv greater than 0

Length of time a firm must wait to recoup the money it has invested in a project

payback period

A preliminary prospectus is sometimes called a:

red herring

Fatou currently owns 2,500 shares of Mariner, Incorporated. She has just been offered the opportunity to purchase additional shares in the company, prior to the shares being offered to the general public. What is this type of an offer called?

rights offer