A well-documented anomaly associated with IPOs is evidence that IPOs other stocks in the aftermarket for up to 3 years. a. outperform b. underperform ANSWER B
Which of the following is NOT a theory that has been suggested to explain empirical evidence that IPOs are initially underpriced? a. litigation risk b. the winner’s curse c. signaling (i.e., strategic underpricing) d. the IPO market is inefficient ANSWER D
An decrease in the current liabilities to total assets ratio will result in ________. A) an increase in risk B) an increase in profit C) a decrease in risk D) a decrease in profit ANSWER C
What is a unit IPO? a. An IPO of a previous unit (or division) of a firm that is being spun off of its parent. b. A package that includes both common stock and warrants. c. An IPO of common shares that is sold in bulk (i.e., as a unit) to a single investor. […]
What types of firms are most likely to go public via a unit IPO? a. larger, older, more established firms b. smaller, younger, more speculative firms ANSWER B
Certain financing plans are termed conservative when ________. A) short-term financing is used frequently B) working capital is relatively high C) current assets are relatively low D) risk is increased ANSWER B
The firm’s annual financing costs of the aggressive financing strategy are ________. (See Table 14.1) A) $21,175 B) $26,075 C) $24,475 D) $22,775 ANSWER B
An important aspect of insiders’ commitment to continuing ownership is the , whereby insiders agree to hold their shares for a period (typically 180 days) after the IPO date. a. ownership commitment b. signaling agreement c. statue quo agreement d. lockup provision ANSWER D
The firm’s annual financing costs of conservative financing strategy are ________. (See Table 14.1) A) $22,775 B) $26,075 C) $26,775 D) $21,175 ANSWER C
An IPO firm has a choice of two methods of selling shares. In the (i) method, the underwriter essentially acts as a (ii), agreeing to purchase all shares offered at a fixed price, and then takes the risk of reselling the shares to the public. In the (iii) method, the underwriter essentially acts as a […]