Reference no: EM131961267
Question: Contemplating an Initial Public Offering Recall that if the economy continues to be strong, Carson Company may need to increase its production capacity by about 50 percent over the next few years to satisfy demand. It would need financing to expand and accommodate the increase in production. Recall that the yield curve is currently upward sloping. Also recall that Carson is concerned about a possible slowing of the economy because of potential Fed actions to reduce inflation. It is also considering issuing stock or bonds to raise funds in the next year.
a. If Carson issued stock now, it would have the flexibility to obtain more debt and would also be able to reduce its cost of financing with debt. Why?
b. Why would an IPO result in heightened concerns in financial markets about Carson Company's potential agency problems?
c. Explain why institutional investors, such as mutual funds and pension funds, that invest in stock for longterm periods (at least a year or two) might prefer to invest in IPOs rather than to purchase other stocks that have been publicly traded for several years.
d. Given that institutional investors such as insurance companies, pension funds, and mutual funds are the major investors in IPOs, explain the flow of funds that results from an IPO. That is, what is the original source of the money that is channeled through the institutional investors and provided to the firm going public?
What is the finance charge for the cycle
: In John Balfour's credit card account interest is charged on the average daily balance. The cycle begins on May 4, and the cycle ends on June 3.
|
Calculate present worth equivalent for the cash flow pattern
: Continuous cash flows increase lineraly from $0 at t = 0 to to a value of $60,000 at t = 5; thereafter, cash flows decrease linearly from a value of $60,000.
|
What are some of the rules of touch that you perceive
: Touch is a form of nonverbal communication that is highly affected by social and cultural rules. What are some of the rules of touch that you perceive?
|
How much will he have at the end of three years
: If Joe banks every payment in an account paying 6% compounded monthly, how much will he have at the end of three years?
|
What is the original source of the money
: That is, what is the original source of the money that is channeled through the institutional investors and provided to the firm going public?
|
How much does joey have today in his account
: Joey saved $750 per month for the last 54 months, received a 4.5% interest annually compounded on a monthly basis, how much does Joey have today in his account?
|
What is the par yield for semiannual coupon bond
: The continuously compounded 6-month, 12-month, 18-month, and 24-month zero rates are 5%, 5.25%, 5.35%, and 5.5%, respectively.
|
What is an annuity due
: Calculate the future sum of $1,000, given that it will be held in the bank for 5 years and earn 10 percent compounded semiannually.
|
List and describe life experiences of either a child growing
: List and describe the life experiences of either a child growing up in an advantaged family OR a child growing up in a disadvantaged family.
|