User
Brooke B Hewitt
Course
BA 520: Financial Strat/Tech(68796-W15)
Test
Part 8 Quiz
Started
1/16/15 2:34 PM
Submitted
1/16/15 3:04 PM
Status
Completed
Attempt Score
63 out of 75 points
Time Elapsed
30 minutes.
Instructions

Question 1
3 out of 3 points

If its managers make a tender offer and buy all shares that were not held by the management team, this is called a private placement.

Correct Answer: False

Response Feedback:
False. In a private placement, securities are sold to one or a few investors, generally institutional investors. Private placements are most common with bonds, but they also occur with stocks.

Question 2
3 out of 3 points

Going public establishes a market value for the firm's stock, and it also ensures that a liquid market will continue to exist for the firm's shares. This is especially true for small firms that are not widely followed by security analysts.

Correct Answer: False

Response Feedback:
False. Going public does establish the firm's market value, but it does not ensure that a liquid market will continue to exist, and this is especially true for small firms that are not widely followed.

Question 3
3 out of 3 points

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: True

Question 4
3 out of 3 points

The term "leaving money on the table" refers to the situation where an investment banking house makes a very low bid for the right to underwrite a firm's new stock offering. The banker is, in effect, "buying the job" with the low bid and thus not getting all the money his firm would normally earn on the job.

Correct Answer: False

Response Feedback:
False. Leaving money on the table occurs when a security issue is underpriced.

Question 5
3 out of 3 points

Whereas commercial banks take deposits from some customers and make loans to other customers, the principal activities of investment banks are (1) to help firms issue new stock and bonds and (2) to give firms advice with regard to mergers and other financial matters. However, financial corporations often own and operate subsidiaries that operate as commercial banks and others that are investment banks. This was not true some years ago, when the two types of banks were required by law to be completely independent of one another.

Correct Answer: True

Question 6
3 out of 3 points

The appropriate discount rate to use when analyzing a refunding decision is the after-tax cost of new debt, in part because there is relatively little risk of not realizing the interest savings.

Correct Answer: True

Question 7
3 out of 3 points

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

Correct Answer: Makes it easier for owner-managers to engage in profitable self-dealings.

Response Feedback:
Publicly owned firms are regulated by the SEC, and this limits the sort of deals that the owner/managers of private companies can make with themselves.

Question 8
3 out of 3 points

Which of the following statements is NOT CORRECT?

Correct Answer: "Going public" establishes a firm's true intrinsic value and ensures that a liquid market will always exist for the firm's shares.

Question 9
3 out of 3 points

Many leases written today combine the features of operating and financial leases. Such leases are often called "combination leases."

Correct Answer: True

Question 10
3 out of 3 points

A sale and leaseback arrangement is a type of financial, or capital, lease.

Correct Answer: True

Question 11
3 out of 3 points

Under a sale and leaseback arrangement, the seller of the leased property is the lessee and the buyer is the lessor.

Correct Answer: True

Question 12
3 out of 3 points