Question 1. Raybac is about to go public. Its present stockholders own 5000,000 shares. The new public issue will represent 800,000 shares. The shares will be priced at $25 to the public with a 4% spread. The out-of-pocket costs will be $450,000. What are the net proceeds to the firm?
- $18,750,000
- $19,200,000
- $18,250,000
- $19,550,000
Question 2. Dr. Jones wants to buy a Dell computer, which will cost $2,788 four years from today. He would like to set aside an equal amount at the end of each year, in order to accumulate the amount needed. He can earn 7% annual return. How much should he set aside?
- $697.00
- $627.93
- $823.15
- $531.81
Question 3. Mr. Smith just invested $20,000 for his 7 year old son. The money will be used for the son's education in 10 years, which he estimates will cost $70,000. What rate of return will Mr. Smith need, in order to meet this goal?
- Between 12% and 13%
- Between 13% and 14%
- Between 14% and 15%
- Between 15% and 16%
Question 4. Carol Thomas will deposit $2,000 today. It will grow for 6 years, at 10% interest, compounded semiannually. She will then withdraw the funds, annually over the next 4 years. The annual interest rate is 8%. Her annual withdrawal will be ______.
- $2,340
- $4,332
- $797
- $1,085
Question 5. To save for her newborn son's college education, Leas Wilson will invest $1,000 at the beginning of each year for the next 18 years the interest rate is 12%. What is the future value?
- $30,690
- $34,931
- $63,440
- $55,750
Question 6. A firm has $1,000,000 in its common stock account and $2,500,000 in its paid-in capital account. The firm issued 100, shares of common stock. What was the original issue price, if only one stock issue has ever been sold?
- $35 per share
- $30 per share
- $25 per share
- $10 per share
Question 7. Maxwell Corporation is coming to the market with a new offering of 3000,000 shares of stock at $25 to the public. Maxwell will receive $22 per share. The firm has 1 million shares outstanding and earnings of $6 million. What is the amount of dilution in earnings per share?
Question 8. No dilution occurs since new money is received by Maxwell. Which investment has the least amount of risk?
- Standard deviation = $500, expected return = $5000
- Standard deviation = $700, expected return = $500
- Standard deviation = $900, expected return = $800
- Standard deviation = $400, expected return = $350