EBK PRINCIPLES OF CORPORATE FINANCE
12th Edition
ISBN: 9781259358487
Author: BREALEY
Publisher: MCGRAW HILL BOOK COMPANY
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Textbook Question
Chapter 15, Problem 1PS
Vocabulary* Each of the following terms is associated with one of the events beneath. Can you match them up?
- a. Best efforts
- b. Bookbuilding
- c. Shelf registration
- d. Rule 144A
Events:
- A. Investors indicate to the underwriter how many shares they would like to buy in a new issue and these indications are used to help set the price.
- B. The underwriter accepts responsibility only to try to sell the issue.
- C. Some issues are not registered but can be traded freely among qualified institutional buyers.
- D. Several tranches of the same security may be sold under the same registration. (A “tranche” is a batch, a fraction of a larger issue.)
a)
Expert Solution
Summary Introduction
To match: The following events with the terms.
Explanation of Solution
Given situation: Best efforts.
Best efforts occur when an underwriter promises and accepts the responsibility only to sell and try the issue. So the option is B.
b)
Expert Solution
Summary Introduction
To match: The following events with the terms.
Explanation of Solution
Given situation: Book building.
Generally, book building is the effort of the underwriter to find out the interests in the sale. It indicates how many shares are willing to buy the customers in new issue. So the is option is A.
c)
Expert Solution
Summary Introduction
To match: The following events with the terms.
Explanation of Solution
Given situation: Shelf registration.
A self-registration sets up tranches, or later sales under the same registration or document. So the option is D.
d)
Expert Solution
Summary Introduction
To match: The following events with the terms.
Explanation of Solution
Given situation: Rule 144A
Rule 144A deals with some issues which are not registered but can be traded freely among the institutional buyers. So the correct option is C.
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Chapter 15 Solutions
EBK PRINCIPLES 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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