Which of the following statements about Private Equity and Venture Capital are true? (i) Private Equity Firms tend to purchase that currently trade on a stock exchange and have recently experienced low stock prices or suffered poor performance. (ii) Venture Capital Firms tend to invest in new start-up enterprises that are not currently traded on a stock exchange. (iii) The availability of funding from Private Equity and Venture Capital has increased in recent decades.

Which of the following statements about Private Equity and Venture Capital are true? (i) Private Equity Firms tend to purchase that currently trade on a stock exchange and have recently experienced low stock prices or suffered poor performance. (ii) Venture Capital Firms tend to invest in new start-up enterprises that are not currently traded on a stock exchange. (iii) The availability of funding from Private Equity and Venture Capital has increased in recent decades.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Koffman Corporation is trying to raise capital. What method would be the least risky to raise capital if it has a less-than-favorable credit rating? A. Stock issuance, since a credit rating won’t negatively affect Koffman’s ability to sell stock. B. With low credit, Koffman doesn't have any options for raising capital. C. Bond issuance, since nobody wants to buy shares of a company with a less-than-perfect credit rating. D. Bond issuance, since additional debt can provide the company with more leverage.
Give typing answer with explanation and conclusion Nelson is faced with a conundrum as a hedge fund manager. He could choose to invest a new client’s wealth in a fairly new and conservative opportunity, but this option has no track record that can be relied on. On the other hand, he could invest it in a copper mine that is seeking capital to expand its infrastructure as there may be a boom in this industry in the near future. From the scenario provided, which key concepts are present? (Exercise caution when answering this question as multiple responses may be correct.) 1. Return 2.Reward 3. Investment 4.Risk 5.Uncertainty
North Star is trying to determine its optimal capital structure, which now consists of only common equity. The firm will add debt to its capital structure if it minimizes its WACC, but the firm has no plans to use preferred stock in its capital structure. In addition, the firm’s size will remain the same, so funds obtained from debt issued will be used to repurchase stock. The percentage of shares repurchased will be equal to the percentage of debt added to the firm’s capital structure. (In other words, if the firm’s debt-to-capital ratio increases from 0 to 25%, then 25% of the shares outstanding will be repurchased.) North Star is a small firm with average sales of $25 million or less during the past 3 years, so it is exempt from the interest deduction limitation. Its treasury staff has consulted with investment bankers. On the basis of those discussions, the staff has created the following table showing the firm’s debt cost at different debt levels: Debt-to-Capital Ratio (Wd)…
some executive contend that they need to adopt a short-term orientation given the average holding period for stocks in professionally managed funds nowadays has dropped to less than one year. Thus, there is no need to consider the interest of long-term shareholders since there are none. comment on this reasoning.
Your corporation needs additional capital to fund an expansion. Discuss the advantages and disadvantages of raising capital through the issuance of stock. Would debt be a better option? Why or why not?
North Star is trying to determine its optimal capital structure, which now consists of only common equity. The firm will add debt to its capital structure if it minimizes its WACC, but the firm has no plans to use preferred stock in its capital structure. In addition, the firm’s size will remain the same, so funds obtained from debt issued will be used to repurchase stock. The percentage of shares repurchased will be equal to the percentage of debt added to the firm’s capital structure. (In other words, if the firm’s debt-to-capital ratio increases from 0 to 25%, then 25% of the shares outstanding will be repurchased.) North Star is a small firm with average sales of $25 million or less during the past 3 years, so it is exempt from the interest deduction limitation. Its treasury staff has consulted with investment bankers. On the basis of those discussions, the staff has created the following table showing the firm’s debt cost at different debt levels: Debt-to-Capital Ratio (Wd)…
What is the best explanation for the recent increase in assets held by mutual funds and other investment companies? Stock market increases Lower tax rate on mutual funds Increased flow of funds into employer-sponsored plans and IRAs Higher savings rate
North Star is trying to determine its optimal capital structure, which now consists of only common equity. The firm will add debt to its capital structure if it minimizes its WACC, but the firm has no plans to use preferred stock in its capital structure. In addition, the firm’s size will remain the same, so funds obtained from debt issued will be used to repurchase stock. The percentage of shares repurchased will be equal to the percentage of debt added to the firm’s capital structure. (In other words, if the firm’s debt-to-capital ratio increases from 0 to 25%, then 25% of the shares outstanding will be repurchased.) North Star is a small firm with average sales of $25 million or less during the past 3 years, so it is exempt from the interest deduction limitation. Its treasury staff has consulted with investment bankers. On the basis of those discussions, the staff has created the following table showing the firm’s debt cost at different debt levels: Debt-to-Capital Ratio (Wd)…
Empirical evidence suggests that IPO issues are generally: priced efficiently by the market. overpriced by investor excitement concerning a new issue. underpriced resulting from SEC regulation. underpriced, in part, to facilitate the issue. overpriced resulting from SEC regulation.
Corporate Venture Capital Funds operate on a different and often longer investment time frame than venture capital funds that have multiple limited partners because corporate venture capital funds are willing to hold investments much longer as their investments return strategic value to the parent company (sole limited partner). True False Venture Capital with many limited partners must consider that the limited partners are expecting to receive cash compensation between 7-10 years after their initial investment. This means the General partner must make investments that are expected to go public or be acquired in this time frame. True False
True or False: Private equity investors can easily sell or exchange their investments for cash anytime? True or False: Private equity firms only invest in small companies? True or False: Everything else stays the same. If a company's gross debt amount increases, its equity value decreases?
I know the bartleby guidelines but I need both questions. I will upvote the answer

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