Which of the following statements is correct? O Flotation costs under a best-efforts arrangement typically are less for a given new equity issue than the costs associated with an underwritten offering, and the corporation is more certain of getting the needed funds under a best-efforts offering. This is why best efforts deals are most common. O If a firm decides to issue securities through a direct (or private) placement, then the underwriting syndicate that is formed to distribute the securities to the public may. at its discretion, decide either to guarantee or not to guarantee the sale of the securities. O If the demand curve for a firm's stock is relatively flat. the firm will have a more difficult time raising a large amount of new equity funds for expansion than would be true if this demand curve were steeper. O It is possible for a firm to go public, and yet not raisc any additional capital.
Which of the following statements is correct? O Flotation costs under a best-efforts arrangement typically are less for a given new equity issue than the costs associated with an underwritten offering, and the corporation is more certain of getting the needed funds under a best-efforts offering. This is why best efforts deals are most common. O If a firm decides to issue securities through a direct (or private) placement, then the underwriting syndicate that is formed to distribute the securities to the public may. at its discretion, decide either to guarantee or not to guarantee the sale of the securities. O If the demand curve for a firm's stock is relatively flat. the firm will have a more difficult time raising a large amount of new equity funds for expansion than would be true if this demand curve were steeper. O It is possible for a firm to go public, and yet not raisc any additional capital.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Which of the following statements is correct?
O Flotation costs under a best-efforts arrangement typically are less for a given new equity issue than the costs
associated with an underwritten offering, and the corporation is more certain of getting the needed funds
under a best-efforts offering. This is why best efforts deals are most common.
O If a firm decides to issue securities through a direct (or private) placement, then the underwriting syndicate
that is formed to distribute the securities to the public may. at its discretion, decide either to guarantee or not
to guarantee the sale of the securities.
O If the demand curve for a firm's stock is relatively flat. the firm will havea more difficult time raising a large
amount of new equity funds for expansion than would be true if this demand curve were steeper.
OIt is possible for a firm to go public, and yet not ralse any additional capital.
O None of these.
Expert Solution
Introduction
The process of issuing shares of a private firm to the public in a new stock issue is known as an initial public offering (IPO), and it allows a company to obtain funds from public investors. To hold an IPO, companies must fulfil the standards of exchanges and the Securities and Exchange Commission (SEC).
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