Problem 1: What is an Initial Public Offering (IPO)? How does an IPO allow an organization to grow financially? When is a merger or an acquisition, rather than an IPO, a more appropriate way to grow?
Select a recent IPO and use the Internet to identify the following characteristics of the selected IPO:
a. Initial offering price
b. Price 1 month after offering
c. Current market price
d. Number of shares outstanding at the time of the IPO
e. Number of shares outstanding 1 month after offering (use the stock history to determine this)
f. Current number of shares
Problem 2. What are the main elements in calculating cost of capital? How would an increase in debt affect the cost of capital? How would you identify the optimal cost of capital for a organization?