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A5 2
2. What are three plausible reasons for underpricing in an IPO?
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- Why does IPO underpricing exist?A6) Why is private equity a possible solution for raising equity (for non-issuable companies)?Q1 Which of the following(s) is (are) correct for IPO underpricing? I. 'Winner's Curse' is one of the proposed arguments to explain the underpricing. II. On average, Underpricing can be seen in all industries and IPO sizes. III. Without underpricing, companies could raise more funding. Only I and II Only II and III Only I and III I, II and III Only I Q2 Hanover Tech is currently an all equity firm that has 320,000 shares outstanding with a market price of €24 a share. The current cost of equity is 15.4 per cent and the tax rate is 36 per cent. The firm is considering adding €1.2 million of debt with a coupon rate of 6 per cent to its capital structure. The debt will be sold at par value. What is the levered value of the equity? Show your steps. Q3 Changes in capital structure benefit the shareholders if and only if the value of the firm increases. True False
- Mf4. Q4.How does the inflation affect a company’s cost of capital? Please include your arguments and examples!Q14 Which of the following assumption of cost of capital is wrongly stated? a. It is not a cost as such b. It is the minimum rate of return on finance c. It is the minimum rate of return on investment d. It consists of riskless cost, business risk and financial riskwhich one is correct please confirm? QUESTION 40 Which of the following is not an argument for the relevance of dividends? a. Existence of issuance costs b. Reduction of agency costs c. Risk aversion d. Protection against dilution
- 7 01:30:33 Which one of the following terms best describes the information you know about a company that will have a significant effect on the price of the company's stock once that Information is released? Multiple Choice O O O abnormal information private, non material information material public information public information material nonpublic informationQuestion 1 LBO funds exit their investments primarily through the IPO process. O True O FalseWhat are the main costs associated with an initial public offering (IPO)?
- V7. Corporate risk views the risk of a project as if it were held in isolation, whereas, stand-alone risk views the risk of a project in the context of the business’s portfolio of projects. True or Falsep13 According to the trade-off theory: The amount of debt a company has is irrelevant. Debt will not be used if a company’s tax rate is high. Companies have an optimal level of debt. Debt should be used only as a last resort.p14 More profitable firms have less debt, which supports the trade-off theory. True False