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22.) Which of the following is true of a "firm commitment" (also called a fixed price offering) stock offering in an IPO? The issuing company earns more when the stock price increases on the secondary market. If the investment bank cannot sell all the shares, the firm has to buy them back. The investment bank buys the shares from the company for less than they are worth. *** The investment bank keeps the shares until the stock is listed on an exchange for trade 23.) Which of the following statements is true? One advantage of the payback period is that is considers the risk of the project. When the IRR of a project is greater than zero, then the NPV of the project must be positive. Unlike IRR, you can have multiple negative cash flows when calculating the NPV. *** The payback period uses a discount rate to adjust for the timing of cash flows. 24.) Federal law requires that a prospectus be filed with the SEC whenever new securities are sold on public markets. Which of the following would you find in the prospectus? Information on the companies management team Information on the firm competitors and products. At least two years of audited financials, showing prior performance All of the above *** 27.) Which of the following is NOT a form of exemption for a firm issuing equity? Regulation offerings Intrastate Offering Best Efforts Offerings *** Regulation A Offerings 28.) Which of the following statement is true regarding the use of exemptions to raise equity? You have to file annual audited financial reports with the SEC You will be able to sell shares to anyone who wants to buy them The shares will be allowed to trade on public exchanges *** There will be limits to how much the company is allowed to raise annually 29.) Which of the following is true regarding VC investment into a portfolio firm? The VC funding will be given preferred stock with warrants, or convertible debt that the company has to report *** The full investment amount will be given to the portfolio firm at one time. If the portfolio firm misses its operating goals, the VC will have no recourse until the end of their investment The investment in the firm will be of unlimited duration 19.) Which of the following is something that is not included in estimating cash flows? Sunk costs New investment in working capital Side effects *** Depreciation 20.) The difference between the present value of investment's cash flows and its cost is the: Net present value *** Internal rate of return Payback period Profitability index

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