FIN 650 GC WEEK 8 EXAM 3 LATEST

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C. $88,006 D. $92,406 E. $92,406 Question 19. Five years ago, the State of Oklahoma issued $2,000,000 of 7% coupon, 20-year semiannual payment, tax-exempt bonds. The bonds had 5 years of call protection, but now the state can call the bonds if it chooses to do so. The call premium would be 5% of the face amount. Today 15-year, 5%, semiannual payment bonds can be sold at par, but flotation costs on this issue would be 2%. What is the net present value of the refunding? Because these are tax-exempt bonds, taxes are not relevant. A. $278,606 B. $292,536 C. $307,163 D. $322,521 E. $338,647 Question 20. The basic doctrine of fairness under bankruptcy provisions states that claims must be recognized in the order of their legal and contractual priority. • True False Question 21. Which of the following is generally NOT true and an advantage of going public? A. Facilitates stockholder diversification. B. Increases the liquidity of the firm’s stock. C. Makes it easier to obtain new equity capital. D. Establishes a market value for the firm. E. Makes it easier for owner-managers to engage in profitable self-dealings. Question 22. Which of the following statements is NOT CORRECT? A. When a corporation’s shares are owned by a few individuals who own most of the stock or are part of the firm’s management, we say that the firm is “closely, or privately, held.”
B. “Going public” establishes a firm’s true intrinsic value and ensures that a liquid market will always exist for the firm’s shares. C. Publicly owned companies have sold shares to investors who are not associated with management, and they must register with and report to a regulatory agency such as the SEC. D. When stock in a closely held corporation is offered to the public for the first time, the transaction is called “going public,” and the market for such stock is called the new issue market. E. It is possible for a firm to go public and yet not raise any additional new capital. Question 23. What would be the priority of the claims as to the distribution of assets in a liquidation under Chapter 7 of the Bankruptcy Act? 1 is the highest claim, 5 is the lowest. (1) Trustees’ costs to administer and operate the firm. (2) Common stockholders. (3) General, or unsecured, creditors. (4) Secured creditors, who have a claim to the proceeds from the sale of specific property pledged to secure a loan. (5) Taxes due to federal and state governments. A. 1, 4, 3, 5, 2 B. 5, 4, 1, 3, 2 C. 4, 1, 5, 3, 2 D. 5, 1, 4, 2, 3 E. 1, 5, 4, 3, 2 Question 24. Which of the following statements is most CORRECT? A. In a private placement, securities are sold to private (individual) investors rather than to institutions. B. Private placements occur most frequently with stocks, but bonds can also be sold in a private placement. C. Private placements are convenient for issuers, but the convenience is offset by higher flotation costs. D. The SEC requires that all private placements be handled by a registered investment banker.
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FIN 650 GC WEEK 8 EXAM 3 LATEST

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