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Q11-2. What is the dominant source of capital funding in the United States? Given this result and the fact that most corporations are net dis-savers, what decisions must most managers face in order to address this financial deficit? Q11-3. How does the role that financial intermediaries play in U.S. corporate finance compare to the role of non-U.S. financial intermediaries? Q11-4. Discuss the U.S. banking system regulations that have had a major impact on the development of the U.S. financial system. In what ways has the U.S. system been affected (positively and negatively) by these regulations? Q11-5. Differentiate between a U.S. commercial bank and the merchant banks found in other developed countries. How have these differences affected the securities markets in the United States versus those in other developed countries? Q11-6. What are the general trends regarding public security issuance by U.S. corporations? Specifically, which security type is most often sold to the public? What is the split between initial and seasoned equity offerings? Q11-7. Distinguish between a Eurobond, a foreign bond, and a Yankee bond. Which of these three represents the greatest volume of security issuance? Q11-8. What do you think are the most important costs and benefits of becoming a publicly traded firm? If you were asked to advise an entrepreneur whether to take his or her firm public, what are the key questions you would ask before making your recommendation? Q11-9. If you were an investment banker, how would you determine the offering price of an IPO? Q11-10. Are the significantly positive short-run and significantly negative long-run returns earned by IPO shareholders compatible with market efficiency? If not, why not? Q11-11. List and briefly describe the key services investment banks provide to firms issuing securities before, during, and after the offering. Q11-11. In preparing for an equity offering, an IB will file necessary documents with regulators, starting with the registration statement. The bankers must value the IPO shares, typically using discounted cash flow models and market comparables. The firm and its bankers go on a road show, talking about the offering to potential investors and getting an idea about demand and pricing of the shares. The lead underwriter distributes shares among the participating investment banks. Once trading begins, the underwriter may engage in price stabilization to make sure sales don't falter immediately after their release to the public. After the offering is sold, the investment bank frequently serves as the market maker for trading in the firm's stock, which means it continuously quotes bid and ask prices for the new security. Q11-12. What are American Depositary Receipts (ADRs), and why have they proven so popular with U.S. investors? Q11-13. How would you explain the fact that the underwriting spread on IPOs averages about 7 percent of the offering price, whereas the underwriting spread on a seasoned offering of common stock averages less than 5 percent? Q11-14. Discuss the various issues that must be considered in selecting an investment banker for an IPO. Which type of placement is usually preferred by the issuing firm? Q11-15. In terms of IPO investing, what does it mean to "flip" a stock? According to the empirical results regarding short- and long-term returns following equity offerings, is flipping a wise investment strategy? Q11-16. What materials are presented in an IPO prospectus? Q11-17. How do you explain the highly politicized nature of share issue privatization (SIP) pricing and share allocation policies? Are governments maximizing offering proceeds, or are they pursuing primarily political and economic objectives?
A firm will pay a $1.50 dividend at the end of year one (D1), has a stock price of $60 (P0), and a constant growth rate (g) of 8 percent. (a) Compute the required rate of return (Ke).
1.What is correlation and when would a researcher be interested in determining the correlation among two or more variables?
The balance sheet and income statement shown below are for Koski Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over..
Dividends paid to a company's own stockholders of $80,000 would be shown on company's statement of cash flows prepared under indirect techniques as:
A corporation makes a single product that it sells for $18 a unit. Fixed costs are $76,000 per month and the product has a contribution margin ratio is 40 percent.
Objective questions on shareholders' interest and ROA and ROI
Drexel Corporation is a United State based company that is establishing a project in a politically unstable country. It is planning two possible sources of financing.
The machines have a 6-yr life after which they are worthless. Illustrate what is the equivalent annual cost of one of these machines if the required return is 16 percent.
However, the space occupied by the production of the valve can be used by another production group that is currently leasing space for $55,000 per year.
Bob bought some land costing $15,740. Today, that same land is valued at $45,517. How long has Bob owned this land if the price of land has been increasing at 6 percent per year?
Describe the challenge of estimating or coming with the good feel for "cost of equity capital" or rate of return that you feel Under Armour investors require as the minimum rate of return that they expect of require Under Armour to earn on their in..
Discuss the difference between annuities and perpetuities, and the methods to calculate their value.
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