PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Question
Chapter 15, Problem 7PS
a)
Summary Introduction
To discuss: True or false of following situations based on venture capital.
b)
Summary Introduction
To discuss: True or false of following situations based on venture capital.
c)
Summary Introduction
To discuss: True or false of following situations based on venture capital.
d)
Summary Introduction
To discuss: True or false of following situations based on venture capital.
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Venture capital (VC) firms are pools of private capital that typically invest in small, fast-growing companies that can't raise funds through other
means. In exchange for this financing, VCs receive a share of a company's equity, and the founders of the firm typically stay on and continue to
manage the company.
A VC firm wants management to focus on improving
while the managers may also act to increase
VC investments have two typical components: (1) managers maintain some ownership in the company and often earn additional equity if the company
performs well; (2) VCs demand seats on the company's board.
Management ownership serves to
the alignment of the incentives of managers with the incentives of owners.
Which of the following statements is NOT true?
Venture capitalists’ sole function is to provide financing for new firms.
Modern venture capital firms tend to specialize in a specific line of business, such as hospitality, food manufacturing, or medical devices.
Venture capitalists bear a substantial amount of risk when they fund a new business.
A significant number of venture capital firms focus on high-technology investments.
An investor provides an entrepreneurial firm with the capital that it needs to grow. over and above providing the capital, in what other ways can the investor add value to the firm? What are the possible downsides of having a venture capitalist as an investor in the business?
Chapter 15 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 15 - Vocabulary Each of the following terms is...Ch. 15 - Prob. 2PSCh. 15 - Vocabulary Here is a further vocabulary quiz....Ch. 15 - Stock issues True or false? a. Venture capitalists...Ch. 15 - Prob. 5PSCh. 15 - Prob. 6PSCh. 15 - Prob. 7PSCh. 15 - Venture capital Complete the passage using the...Ch. 15 - Venture capital a. A signal is credible only if it...Ch. 15 - IPOs Refer to Section 15.1 and the Marvin...
Ch. 15 - Prob. 11PSCh. 15 - Prob. 12PSCh. 15 - Issue costs In April 2019. Van Dyck Exponents...Ch. 15 - Underpricing In same U.K. IPOs, any investor may...Ch. 15 - Prob. 15PSCh. 15 - Prob. 16PSCh. 15 - Underpricing Construct a simple example to show...Ch. 15 - Prob. 18PSCh. 15 - Prob. 19PSCh. 15 - Costs of a general cash offer Why are the costs of...Ch. 15 - Prob. 21PSCh. 15 - Prob. 22PSCh. 15 - Rights issues In 2012, the Pandora Box Company...Ch. 15 - Prob. 24PSCh. 15 - Rights issues vs. cash offers Suppose that instead...Ch. 15 - Private placements You need to choose between...Ch. 15 - Prob. 27PSCh. 15 - Prob. 28PSCh. 15 - Dilution Here is recent financial data on Pisa...
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- Venture capital firms: O A. Generally, provide capital to back an new company, with little or no record of success, and it managers B. Take an equity stake in the company O C. Are not passive investors D. Do not make outright loans O E. All of the abovearrow_forwardA venture capitalist invests primarily his/her own money in a company, seeking a substantial return. true or false?arrow_forwardVenture capital (VC) firms are pools of private capital that typically invest in small, fast-growing companies, which usually can’t raise funds through other means. In exchange for this financing, the VCs receive a share of the company’s equity, and the founders of the firm typically stay on and continue to manage the company. Describe the nature of the incentive conflict between VCs and the managers, identifying the principal and the agent. VC investments have two typical components: (1) managers maintain some ownership in the company and often earn additional equity if the company performs well; (2) VCs demand seats on the company’s board. Discuss how these two components help address the incentive conflict.arrow_forward
- (a) Venture capital funds want to invest in innovative startups. Why should VC manager care about agency theory? What is agency theory about? (b) Venture capital funds invest in startups. Why are convertible preferred securities so prevalent in such investments?arrow_forwardWe can imagine the financial manager doing several things on behalf of the firm's stockholders. For example, the manager might: Make shareholders as wealthy as possible by investing in real assets. Modify the firm's investment plan to help shareholders achieve a particular time pattern of consumption. Choose high- or low-risk assets to match shareholders' risk preferences. Help balance shareholders' checkbooks. But in well-functioning capital markets, shareholders will vote for only one of these goals. Which one? Why?arrow_forwardI need the answer key to these two multiple-choice questions belowarrow_forward
- Which one of the following is true regarding venture capitalists? I. They are large shareholders of the issuing firms and exit their investment in initial public offerings. II. They are large investors who want to buy the shares in initial public offerings. III. They tend to invest in young risky ventures. IV. They like underpricing in initial public offerings. A. I and II B. I and IV C. I, III, and IV D. I, II, III, and IV Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardWhat would be the answerarrow_forward37. Lis/are a way to raise capital by selling ownership or equity: A. Issuing Stock B. Seeking Early-stage capital C. Issuing Bonds D. Developing profits E. Seeking a Bank Loan 38. is/are a way to raise capital through borrowing: A. Issuing Stock B. Seeking Early-stage capital C. Issuing Bonds D. Developing profits E. Mutual Funds 39. If a firm's revenues are greater than costs, then the business would be considered:arrow_forward
- Since venture capital only invest in startup business, very high-risk investments, explain how venture capital minimize their level of risk?arrow_forwardYou are a consultant for several emerging, high growth technology firms that were started locally and have been a part of a business incubator in your area. These firms start out as sole proprietorships but quickly realize the need for more capital and often incorporate. One of the common questions you get is about stockholders equity. Explain the key ways the companies need to view retained earnings if they want to use it as a source of capital for future expansion and growth after incorporating.arrow_forwardIf financial managers are to achieve corporate goals, they require well-developed financial markets where transfer of wealth from savers to borrowers is efficient in both pricing and operational cost.Explain the meaning of: informational efficiency of financial markets. Operational efficiency of financial markets. Explain the benefits that are enjoyed by investors because of existence of capital market in Rwanda All 3 question i have asked someone who doing accounting ,business or economics may answer Thank you !arrow_forward
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