FINANCIAL MANAGEMENT: THEORY AND PRACT
15th Edition
ISBN: 9781305632455
Author: BRIGHAM E. F.
Publisher: CENGAGE L
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Chapter 18, Problem 4Q
Summary Introduction
To determine: The affect of given items on company’s ability in attracting new capital and flotation cost.
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How do you think each of the following items would affect a company’sability to attract new capital and the flotation costs involved in doing so?a. A decision of a privately held company to go publicb. The increasing institutionalization of the “buy side” of the stock andbond marketsc. The trend toward financial conglomerates as opposed to stand-aloneinvestment banking housesd. Elimination of the preemptive righte. The introduction in 1981 of shelf registration of securities
Which is false about long-term sources of a firm’s capital?
a. Preferred shares are securities whose intrinsic value is based on prospective earnings
b. Some types of bank loans may require collateral from potential debtors
c. Retained earnings are internal sources of funding that can be utilized for expansion
d. All types of corporations may issue equity securities to the public
Discuss whether the director's view (Miss Kay)
that issuing traded bonds will decrease
the weighted average cost of capital ATC Bhd
and thereby increase the value of the
company. Discussion should consider from
the viewpoint of:
i. Traditional
ii. Modigliani & Miller
ii. Market imperfections
iv. Pecking order theory
Chapter 18 Solutions
FINANCIAL MANAGEMENT: THEORY AND PRACT
Ch. 18 - Prob. 1QCh. 18 - Prob. 2QCh. 18 - Prob. 3QCh. 18 - Prob. 4QCh. 18 - Prob. 5QCh. 18 - Prob. 1PCh. 18 - Prob. 2PCh. 18 - Prob. 3PCh. 18 - Bynum and Crumpton, a small jewelry manufacturer,...Ch. 18 - Prob. 5P
Ch. 18 - Prob. 8SPCh. 18 - Prob. 1MCCh. 18 - Prob. 2MCCh. 18 - Prob. 3MCCh. 18 - Prob. 4MCCh. 18 - Randy’s, a family-owned restaurant chain operating...Ch. 18 - Prob. 6MCCh. 18 - Prob. 7MCCh. 18 - Prob. 8MCCh. 18 - Prob. 9MCCh. 18 - Randy’s, a family-owned restaurant chain operating...Ch. 18 - Randys, a family-owned restaurant chain operating...Ch. 18 - Randy’s, a family-owned restaurant chain operating...Ch. 18 - Randy’s, a family-owned restaurant chain operating...Ch. 18 - Prob. 14MCCh. 18 - Prob. 15MCCh. 18 - Prob. 16MCCh. 18 - Prob. 17MCCh. 18 - Prob. 18MC
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- 11. Large, well-known public companies can reduce the time required to register and issue securities byusing a(n)a.Shelf registration.b.Subchapter S registration.c.Underwriting syndicate.d.Secondary market registration.e."Red herring" registration. 12. Which of the following statements about listing on a stock exchange is most correct?a.Listing is a decision of more significance to a firm than going public.b.Any firm can be listed on the NYSE as long as it pays the listing feec.Listing provides a company with some "free" advertising, and status as a listed company mayenhance the firm's prestige.d.Listing reduces the reporting requirements for firms, because listed firms file reports with theexchange rather than with the SEC.e.Statements b and c are both correct.arrow_forwardProvide answerarrow_forwardGive typing answer with explanation and conclusion What is the benefit to a company from a securities underwriter? A) They generate demand for a company’s securities by giving them a strong credit rating B) They help companies to receive a premium on the sale of their securities C) They study the market and advise companies on where to set their IPO share price D) They help companies to reduce the risk associated with an IPOarrow_forward
- Which of the following characteristics are not an advantage of being a publicly traded company? Group of answer choices A. Allows the firm to play the merger game, using marketable securities for the purchase of other firms. B. Prestige is helpful in bank negotiations, executive recruitment and the marketing of products. C. Tapping into the security markets for a greater amount of funds. D. Compliance costs because of various public disclosure requirements.arrow_forwardHow does a cost-efficient capital market help reduce the prices of goods and services? Describe the different ways in which capital can be transferred from suppliers of capital to those who are demanding capital. Is an initial public offering an example of a primary or a secondary market transaction? Indicate whether the following instruments are examples of money market or capital market securities. a. US Treasury bills b. Long-term corporate bonds c. Common stocks d. Preferred stocks e. Dealer commercial paper Briefly explain what is meant by the term efficiency continuum.arrow_forwardFollowing JPMorgan Chase's significant acquisition of First Republic Bank in 2023, how does the Efficient Market Hypothesis (EMH) explain the market's reaction to major corporate financial decisions, and what implications does this have for a company's approach to capital structure and dividend policy? Consider how information asymmetry between management and investors affects market efficiency, particularly during periods of banking sector stress, and analyze how the market's processing of complex financial information influences both the timing and structure of major corporate actions like acquisitions, stock buybacks, or dividend changes. Examine the relationship between market efficiency and the speed at which new information is incorporated into stock prices, especially in cases involving large financial institutions where systemic risks may be a concern.arrow_forward
- Under which condition an external equity financing can be advantageous? Group of answer choices When a firm wishes to raise additional capital by selling a portion of the existing owners' stock while maintaining control of the firm When a firm's capital structure contains more equity than debt All of the above When common stock becomes less risky to the firm than fixed-income securitiesarrow_forwardHi! I'm having difficulty comparing the choices between raising a large amount of cash in the capitaal market verses the bond market. I have to make a decision as to what is best and why, all while considering ethical implications of financial reporting and how it relates to acquiring additional investors and accessing markets for additional capital. Consider the impact on the following on your choice: The company’s existing capital structure The company’s current market capitalization The company’s weighted average cost of capital The company’s degree of operating, financial and combined leveragearrow_forward28) National paints SAOG is planning to issue new securities in the financial market to raise capital for its new project. Which of the following market can the company issue its shares? a. None b. Money Market c. Bond Market d. Secondary Marketarrow_forward
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