Exam 14: Security Structures and Determining Enterprise Values

When consistent assumptions are used, estimated equity values under the enterprise and equity methods should be:

As the underlying stock price increases in value, a put option to sell it becomes more valuable.

Which of the following is not a typical characteristic of convertible notes?

Entity valuation allows us to answer the question of how much debt a venture needs to issue to achieve a target capital structure (D/V).

The Black and Scholes model is intended to be used to value:

Which of the following can be structured to assure shareholders that they will share in the payment of any dividends to common stockholders?

Options generally have no effect on the value of a venture capital investment.

An option granting the right to sell a stock at $10 when that stock currently has a market price of $8 is "in the money."

A European-style option may only be exercised on a specific date.

A warrant is a type of call option.

Common stock represents the least senior claim on a venture's assets.

A call option is the obligation to purchase a specific asset at a predetermined price.

Which of the following is an example of a put option that is "out of the money"?

If a call option can be bought for $12 and the stock's market value is $12, it's said to be "at the money."

A round of financing where shares sell for a lower price than previous rounds is known as a(n):

Generally speaking, warrants are call options that allow the holder to purchase what type of security at a specific price?

For preferred noncumulative stock, all previously unpaid preferred dividends must be paid before any common stock dividend is paid.

An American-style option is an option that can be exercised only at the expiration date.

The enterprise value includes the value of the debt, equity, and warrant pieces of a venture.

An option that can be exercised only at its expiration date is called a(n):