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LO3: Illustrate the different ways a company
can raise capital. Compare the different sources of capital.

 

1.       
An example of indirect expense when issuing shares in an IPO, for a
company, is:

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a.     Underwriting
spread

b.    Legal fees

c.     Filing fees

d.    Management time spent
on the task

 

2.       
An example of direct expense when issuing shares in an IPO, for a
company, is:

a.   
Underwriting spread

b.    Green Shoe provisions

c.     Underpricing spread

d.    Management time spent on
the task

 

3.       
Which of the following statements about Venture Capital is true?

a.     It normally invests in
already established companies

b.  
It normally requires an exit
strategy as part of the deal

c.     It normally targets the
100% of the share of the target company

d.    It normally invests in one
company an amount in the order of tens of millions of dollar

 

4.       
Compared to venture capital firms, private equity firms normally invest:

a.    Higher amounts in the
target companies, in exchange of higher stakes of equity

b.    Lower amounts in the
target companies, in exchange of lower stakes of equity

c.     Only in the preferred
shares of target companies

d.    Only in the rights
attached to the shares of the target companies

 

5.       
An increase in the leverage of the company’s capital structure leads to:

a.     Increased
equity dilution

b.    Increased equity
concentration

c.     Increased corporate
risk

d.    Lower interest payments

 

6.       
Which of the following statements about debt is true?

a.   
Senior debt has priority over
equity on the assets of the company

b.    Junior debt has priority
over Senior debt on the assets of the company

c.     Equity has priority over
Senior debt on the assets of the company

d.    Senior debt and Equity
have priority over Junior debt on the assets of the company

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