Question 1

Refer to the data for NorthWest Water (NWW) .What is the NPV if NWW refunds its bonds today?

Accepted Answer

A)   $1,746,987
B)   $1,838,933
C)   $1,935,719
D)   $2,037,599
E)   $2,241,359F) A) and C)
G) C) and E)

Question 2

Five years ago,the State of Oklahoma issued $2,000,000 of 7% coupon,20-year semiannual payment,tax-exempt bonds.The bonds had 5 years of call protection,but now the state can call the bonds if it chooses to do so.The call premium would be 5% of the face amount.Today 15-year,5%,semiannual payment bonds can be sold at par,but flotation costs on this issue would be 2%.What is the net present value of the refunding? Because these are tax-exempt bonds,taxes are not relevant.

Accepted Answer

A)   $278,606
B)   $292,536
C)   $307,163
D)   $322,521
E)   $338,647F) None of the above
G) B) and D)

Question 3

The cost of meeting SEC and possibly additional state reporting requirements regarding disclosure of financial information,the danger of losing control,and the possibility of an inactive market and an attendant low stock price are potential disadvantages of going public.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements is NOT CORRECT?

Accepted Answer

A)   "Going public" establishes a firm's true intrinsic value and ensures that a liquid market will always exist for the firm's shares.
B)   Publicly owned companies have sold shares to investors who are not associated with management,and they must register with and report to a regulatory agency such as the SEC.
C)   When stock in a closely held corporation is offered to the public for the first time,the transaction is called "going public," and the market for such stock is called the new issue market.
D)   It is possible for a firm to go public and yet not raise any additional new capital.
E)   When a corporation's shares are owned by a few individuals who own most of the stock or are part of the firm's management,we say that the firm is "closely,or privately,held."F) None of the above
G) B) and D)

Question 5

Which of the following is generally NOT true and an advantage of going public?

Accepted Answer

A)   Increases the liquidity of the firm's stock.
B)   Makes it easier to obtain new equity capital.
C)   Establishes a market value for the firm.
D)   Makes it easier for owner-managers to engage in profitable self-dealings.
E)   Facilitates stockholder diversification.F) All of the above
G) A) and D)

Question 6

Which of the following statements about listing on a stock exchange is most CORRECT?

Accepted Answer

A)   Any firm can be listed on the NYSE as long as it pays the listing fee.
B)   Listing provides a company with some "free" advertising,and it may enhance the firm's prestige and help it do more business.
C)   Listing reduces the reporting requirements for firms,because listed firms file reports with the exchange rather than with the SEC.
D)   The OTC is the second largest market for listed stock,and it is exceeded only by the NYSE.
E)   Listing is a decision of more significance to a firm than going public.F) A) and B)
G) A) and C)

Question 7

Refer to the data for NorthWest Water (NWW) .The amortization of flotation costs reduces taxes and thus provides an annual cash flow.What will the net increase or decrease in the annual flotation cost tax savings be if refunding takes place?

Accepted Answer

A)   $6,480
B)   $7,200
C)   $8,000
D)   $8,800
E)   $9,680F) A) and E)
G) A) and C)

Exam 18: Public and Private Financing: Initial Offerings, Seasoned Offerings, and Investment Banks

Refer to the data for NorthWest Water (NWW) .What is the NPV if NWW refunds its bonds today?

Correct Answer
verified

The cost of meeting SEC and possibly additional state reporting requirements regarding disclosure of financial information,the danger of losing control,and the possibility of an inactive market and an attendant low stock price are potential disadvantages of going public.

Correct Answer
verified

Which of the following statements is NOT CORRECT?

Correct Answer
verified

Which of the following statements about listing on a stock exchange is most CORRECT?

Correct Answer
verified

Correct Answer
verified

Which of the following is generally NOT true and an advantage of going public?

Correct Answer
verified

Refer to the data for NorthWest Water (NWW) .The amortization of flotation costs reduces taxes and thus provides an annual cash flow.What will the net increase or decrease in the annual flotation cost tax savings be if refunding takes place?

Correct Answer
verified

Exam 18: Public and Private Financing: Initial Offerings, Seasoned Offerings, and Investment Banks

Refer to the data for NorthWest Water (NWW) .What is the NPV if NWW refunds its bonds today?

Correct AnswerverifiedShow Answer

The cost of meeting SEC and possibly additional state reporting requirements regarding disclosure of financial information,the danger of losing control,and the possibility of an inactive market and an attendant low stock price are potential disadvantages of going public.

Correct AnswerverifiedShow Answer

Which of the following statements is NOT CORRECT?

Correct AnswerverifiedShow Answer

Which of the following statements about listing on a stock exchange is most CORRECT?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is generally NOT true and an advantage of going public?

Correct AnswerverifiedShow Answer

Refer to the data for NorthWest Water (NWW) .The amortization of flotation costs reduces taxes and thus provides an annual cash flow.What will the net increase or decrease in the annual flotation cost tax savings be if refunding takes place?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified