SOLVED

11) Terri-Tech Inc. is a small company made up of two twenty-something software developers. Terri-Tech requires financing to market an innovative application. The dealer with whom the developers have worked has suggested that the developers offer a new issue of shares by means of a direct invitation to the public, through an advertisement in the Globe and Mail Report on Business. The dealer will not assume the risk of the issue being bought. What is the name of this method of equity financing? A) Private placement. B) A bought deal. C) A best efforts deal. D) A tender issue. E) A reserve deal. 12) Which of the following is a consistent pattern observed in a number of studies of the market that suggests there is an element of market inefficiency? A) Heavy industry experiencing far greater returns from projects whose capital was raised with equity than with debt. B) Higher returns being achieved from investing in companies having a higher dividend payout ratio. C) Companies employing woman as Presidents achieving significantly higher earnings than those with men as Presidents. D) Purchases or sales of shares providing greater returns when traded on certain days of the week and certain months of the year. E) Markets showing a significantly greater decline on days of severe weather such as snow, thunderstorms or unusually high winds. 13) Silverman Ltd. has five million common shares outstanding at $24.00 a share. The Board of Directors has authorized a one-for-three rights issue at $20 per share. What is the ex-rights price? A) $11 B) $21 C) $23 D) $28 E) $31 14) Mercury Metals Inc. has 10 million common shares outstanding at price of $72.00 a share. The company is offering a one-for-five rights issue at $60.00 a share. What is the value of the rights offer? A) $2 B) $6 C) $9 D) $10 E) $24 15) Bontempo Electronics Inc. has total assets of $81 million, financed by $36 million of debt and $45 million of equity where the contributed common shares account for $12 million. There are 2.4 million shares outstanding. The directors of Bontempo Electronics have declared a stock dividend of one share for every three shares held. If the market value of the shares is $27.50 before the stock dividend, which of the following is the best conclusion to make? A) Shareholders will experience an increase in their wealth of $4 million. B) The company has effectively reduced its debt to equity ratio. C) Shareholders will suffer a dilution of their future earnings by 33%. D) Shareholders will experience an increase in their wealth of $22 million. E) There has been no change in shareholders’ wealth. 16) On June 3, CapiCal who had 2,500,000 common shares outstanding executed a two-for-one stock split. The company’s shares that had been trading for $96.50 a share at the close of yesterday’s trading, closed June 3rd at $48.50. What is the increase/decrease in market capitalization that CapiCal experienced? A) No increase or decrease B) An increase of $1,250,000 C) An increase of $122,500,000 D) A decrease of $1,121,250 E) A decrease of $121,250,000 17) Assuming the market takes on the characteristics of a weak form of efficiency, which of the following would be the worst investment strategy to practice? A) Technical Analysis. B) Fundamental Analysis. C) A comparison of price/earnings ratios. D) A comparison of the EPS. E) Diversification. 18) For a market to exhibit semi-strong form of efficiency, which of the following situations must exist? A) New information is available to all investors who immediately act upon it establishing the best estimate of the worth of the stocks. B) The cost of capital is the same for each investor in the market. C) A large numbers of investors are immediately motivated by new information to trade shares establishing the best estimate of the worth of the stocks. D) A single investor is motivated by new information to trade shares resulting in the best estimate of the worth of the stocks. E) The risk premium demanded is the same for each investor in the market. 19) Details of a government bailout of a large Canadian auto parts company signed late on Friday were released to the press on Monday. If the market reflects a strong form of efficiency, when would a change in share price reflecting the news of the bailout have happened? A) At the time when agreement was reached on the details of the plan. B) At the time when the government was first approached for a bailout. C) On the Friday that the deal was signed. D) On the Monday that the deal was officially announced. E) At the time the government and the auto parts company sat down to talk. 20) RAJ Inc. would like to issue one million common shares and has an unpublished reserve price of $4.75. The company’s investment dealer received the following response to its tender offer. 200,000 shares could be sold at $5.45, 350,000 at $5.25, 350,000 at $5.05, 600,000 at $4.90, 525,000 at $4.75, 725,000 at $4.50 and 700,000 at $4.25. What is the resulting striking price and the distribution of shares to each shareholder? A) $5.45 with the one investor taking all that are available. B) $5.05 with each investor allotted 4 for each 5 tendered. C) $4.88 with each investor allotted 2 shares for each 5 tendered. D) $4.75 with each investor receiving 4 for every 5 tendered. E) $4.90 with each investor allotted 2 for each 3 tendered.