V3.   Which of the following statements about IPO is correct? O In a market without agency problem, Dutch auction is the worst among the three IPO methods in terms of finding out the best reservation price of the IPO shares • In a firm commitment cash offer, the underwriter would buy the whole issue from the issuer, and then sell the issue to the market. O Best efforts cash offer is the most popular IPO method in the US market. • In the best efforts cash offer, a firm would have to continue the issuance even if the demand does not meet their expectation.

Describe the different mechanisms available to a firm for repurchasing shares. There are three mechanisms: (Select the best choice below.) A. 1) In an open market repurchase, the firm repurchases the shares in the open market. This is the most common mechanism in the United States. B. 2) In a tender offer, the firm announces the intention to repurchase a fixed number of shares for a fixed price, conditional on shareholders agreeing to tender their shares. Even if not enough shares are tendered, the firm s obligated to repurchase the shares that are tendered. C. 2) In a tender offer, the firm announces the intention to all shareholders to repurchase a fixed number of shares for a fixed price, conditional on shareholders agreeing to tender their shares. If not enough shares are tendered, the deal can be cancelled. D. 3) A targeted repurchase is similar to a tender offer except that it is not open to all shareholders; only specific shareholders can tender their shares in a targeted…

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(c) A risk-neutral competitive market maker clears the market for trading in a stock after observing the incoming orders from a noise trader and an informed trader (who perfectly knows the true value of the stock). The noise trader buys and sells 1 share of the stock with equal probability, whereas the informed trader buys the stock if the value is $14 (high) and sells the stock if the value is $5 (low). The market maker believes initially that there is a 45% probability of high value and a 55% probability of low value. What profits can the informed trader expect to make in this market?

Consider the following premerger information about a bidding firm (Firm B) and a target firm (Firm T). Assume that both firms have no debt outstanding.   Firm B   Firm T     Shares outstanding   6,400     1,600     Price per share $ 48   $ 19     Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $8,900. a. If Firm T is willing to be acquired for $21 per share in cash, what is the NPV of the merger? b. What will the price per share of the merged firm be assuming the conditions in (a)? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. If Firm T is willing to be acquired for $21 per share in cash, what is the merger premium? d. Suppose Firm T is agreeable to a merger by an exchange of stock. If B offers one of its shares for every two of T's shares, what will the price per share of the merged firm be? (Do not round intermediate calculations and round your answer to 2…

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Suppose we observe from market data that, for a given non-dividend paying stock, F, ± Soer. What might explain the inequality in this relationship (i.e. why don't we observe Fo = Soer") if markets are efficient? Hint: try to identify real-world market frictions that might cause cases where F, + S,e! does not result in arbitrage opportunities rT