Question 1

A preemptive right is a right for existing owners to buy sufficient shares to preserve their ownership share.

Accepted Answer

A) True 
 B)False  True

Question 2

Warrant valuation (as presented in this text)is similar to option valuation except that one applies a dilution factor to the option value to arrive at a warrant value.

Accepted Answer

A) True 
 B)False  True

Question 3

When consistent assumptions are used,we

Accepted Answer

A) get the same value for equity under the enterprise and equity methods of valuation 
B) we get a higher value of equity under the equity method of valuation 
C) we get a lower value of equity under the equity method of valuation 
D) we get equity values that cannot be compared across the equity and enterprise methods of valuation 
A) get the same value for equity under the enterprise and equity methods of valuation 
B) we get a higher value of equity under the equity method of valuation 
C) we get a lower value of equity under the equity method of valuation 
D) we get equity values that cannot be compared across the equity and enterprise methods of valuation A

Question 4

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

Accepted Answer

A) down round 
B) recessive round 
C) reset round 
D) a and c 
A) down round 
B) recessive round 
C) reset round 
D) a and c

Question 5

Which of the following is never a component of a preferred stock's security structure?

Accepted Answer

A) the right to participate in any dividends paid to common stock shareholders 
B) payment of dividends in the form of additional shares of preferred stock 
C) the option for the holder to convert preferred stock into common stock 
D) the option for the venture to call outstanding preferred stock 
E) none of the above; all of these may be included in the structure of
Preferred stock 
A) the right to participate in any dividends paid to common stock shareholders 
B) payment of dividends in the form of additional shares of preferred stock 
C) the option for the holder to convert preferred stock into common stock 
D) the option for the venture to call outstanding preferred stock 
E) none of the above; all of these may be included in the structure of
Preferred stock

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Which of the following requires that all previously unpaid preferred dividends must be paid prior to any common dividend?

Accepted Answer

A) paid in kind preferred stock 
B) cumulative preferred stock 
C) participating preferred stock 
D) convertible preferred stock 
E) non-cumulative preferred stock 
A) paid in kind preferred stock 
B) cumulative preferred stock 
C) participating preferred stock 
D) convertible preferred stock 
E) non-cumulative preferred stock

Question 8

Which of the following is an example of a call option which is in the money?

Accepted Answer

A) The option to sell at $11,the stock is worth $12. 
B) The option to buy at $13,the stock is worth $12. 
C) The option to buy at $12,the stock is worth $12. 
D) The option to sell at $13,the stock is worth $12. 
E) The option to buy at $11,the stock is worth $12. 
A) The option to sell at $11,the stock is worth $12. 
B) The option to buy at $13,the stock is worth $12. 
C) The option to buy at $12,the stock is worth $12. 
D) The option to sell at $13,the stock is worth $12. 
E) The option to buy at $11,the stock is worth $12.

Question 9

By issuing preferred stock,and thus forfeiting bankruptcy rights from the use of debt,the venture and its investors can benefit by committing to an internal reorganization as opposed to bankruptcy reorganization.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following provides the option to transform preferred stock into common stock?

Accepted Answer

A) paid in kind preferred stock 
B) cumulative preferred stock 
C) participating preferred stock 
D) convertible preferred stock 
E) non-cumulative preferred stock 
A) paid in kind preferred stock 
B) cumulative preferred stock 
C) participating preferred stock 
D) convertible preferred stock 
E) non-cumulative preferred stock

Question 11

Which of the following are components of common equity?

Accepted Answer

A) common stock 
B) preferred stock 
C) a and b 
D) none of the above 
A) common stock 
B) preferred stock 
C) a and b 
D) none of the above

Question 12

An alternative approach to the Enterprise Valuation method adds the tax shield from paying interest back into the flows and discounts at a before-tax weighted average cost of capital.

Accepted Answer

A) True 
 B)False

Question 13

Owning a put option on a stock is the same as selling a call option on that same stock.

Accepted Answer

A) True 
 B)False

Question 14

The Black and Scholes model requires an exercise price as an input.

Accepted Answer

A) True 
 B)False

Question 15

The concept of an enterprise value is that it is the combined value of all of venture's financing,typically equity plus all of the debt.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is an example of a put option which is at the money?

Accepted Answer

A) The option to sell at $11,the stock is worth $12. 
B) The option to buy at $13,the stock is worth $12. 
C) The option to sell at $12,the stock is worth $12. 
D) The option to sell at $13,the stock is worth $12. 
E) The option to buy at $11,the stock is worth $12 
A) The option to sell at $11,the stock is worth $12. 
B) The option to buy at $13,the stock is worth $12. 
C) The option to sell at $12,the stock is worth $12. 
D) The option to sell at $13,the stock is worth $12. 
E) The option to buy at $11,the stock is worth $12

Question 17

For American and Bermudan embedded options,the exercise price can change over time as specified in the security agreement.

Accepted Answer

A) True 
 B)False

Question 18

The right to buy a specified asset at a specified price on a specified date is called:

Accepted Answer

A) a forward contract 
B) an American-style put option 
C) an American-style call option 
D) a European-style call option 
E) a European style put option 
A) a forward contract 
B) an American-style put option 
C) an American-style call option 
D) a European-style call option 
E) a European style put option

Question 19

If a share of preferred stock has a $10 par value,and the stock has a 2:1 conversion ratio,then the conversion price would be $5.

Accepted Answer

A) True 
 B)False

Question 20

An option not currently worth exercising is said to be an out of the money option.

Accepted Answer

A) True 
 B)False

A preemptive right is a right for existing owners to buy sufficient shares to preserve their ownership share.

Warrant valuation (as presented in this text)is similar to option valuation except that one applies a dilution factor to the option value to arrive at a warrant value.

When consistent assumptions are used,we

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

Which of the following is never a component of a preferred stock's security structure?

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

Which of the following requires that all previously unpaid preferred dividends must be paid prior to any common dividend?

Which of the following is an example of a call option which is in the money?

By issuing preferred stock,and thus forfeiting bankruptcy rights from the use of debt,the venture and its investors can benefit by committing to an internal reorganization as opposed to bankruptcy reorganization.

Which of the following provides the option to transform preferred stock into common stock?

Which of the following are components of common equity?

An alternative approach to the Enterprise Valuation method adds the tax shield from paying interest back into the flows and discounts at a before-tax weighted average cost of capital.

Owning a put option on a stock is the same as selling a call option on that same stock.

The Black and Scholes model requires an exercise price as an input.

The concept of an enterprise value is that it is the combined value of all of venture's financing,typically equity plus all of the debt.

Which of the following is an example of a put option which is at the money?

For American and Bermudan embedded options,the exercise price can change over time as specified in the security agreement.

The right to buy a specified asset at a specified price on a specified date is called:

If a share of preferred stock has a $10 par value,and the stock has a 2:1 conversion ratio,then the conversion price would be $5.

An option not currently worth exercising is said to be an out of the money option.

Introduction to Finance for Entrepreneurs

Developing the Business Idea

Organizing and Financing a New Venture

Preparing and Using Financial Statements

Evaluating Operating and Financial Performance

Managing Cash Flow

Types and Costs of Financial Capital

Securities Law Considerations When Obtaining Venture Financing

Projecting Financial Statements

Valuing Early-Stage Ventures

Venture Capital Valuation Methods

Professional Venture Capital

Other Financing Alternatives

Harvesting the Business Venture Investment

Financially Troubled Ventures: Turnaround Opportunities

Filters

Exam 14: Security Structures and Determining Enterprise Values

A preemptive right is a right for existing owners to buy sufficient shares to preserve their ownership share.

Warrant valuation (as presented in this text)is similar to option valuation except that one applies a dilution factor to the option value to arrive at a warrant value.

When consistent assumptions are used,we

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

Which of the following is never a component of a preferred stock's security structure?

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

Which of the following requires that all previously unpaid preferred dividends must be paid prior to any common dividend?

Which of the following is an example of a call option which is in the money?

By issuing preferred stock,and thus forfeiting bankruptcy rights from the use of debt,the venture and its investors can benefit by committing to an internal reorganization as opposed to bankruptcy reorganization.

Which of the following provides the option to transform preferred stock into common stock?

Which of the following are components of common equity?

An alternative approach to the Enterprise Valuation method adds the tax shield from paying interest back into the flows and discounts at a before-tax weighted average cost of capital.

Owning a put option on a stock is the same as selling a call option on that same stock.

The Black and Scholes model requires an exercise price as an input.

The concept of an enterprise value is that it is the combined value of all of venture's financing,typically equity plus all of the debt.

Which of the following is an example of a put option which is at the money?

For American and Bermudan embedded options,the exercise price can change over time as specified in the security agreement.

The right to buy a specified asset at a specified price on a specified date is called:

If a share of preferred stock has a $10 par value,and the stock has a 2:1 conversion ratio,then the conversion price would be $5.

An option not currently worth exercising is said to be an out of the money option.

Introduction to Finance for Entrepreneurs

Developing the Business Idea

Organizing and Financing a New Venture

Preparing and Using Financial Statements

Evaluating Operating and Financial Performance

Managing Cash Flow

Types and Costs of Financial Capital

Securities Law Considerations When Obtaining Venture Financing

Projecting Financial Statements

Valuing Early-Stage Ventures

Venture Capital Valuation Methods

Professional Venture Capital

Other Financing Alternatives

Harvesting the Business Venture Investment

Financially Troubled Ventures: Turnaround Opportunities

Filters