Public and Private Financing Assignment Paper

September 1, 2022

Public and Private Financing Assignment Paper

Order ID:89JHGSJE83839

Style:APA/MLA/Harvard/Chicago

Pages:5-10

Instructions:

Public and Private Financing Assignment Paper

Public and Private Financing: Initial Offerings, Seasoned Offerings, and Investment Banks Mini Case

Randy’s, a family-owned restaurant chain operating in Alabama, has grown to the point that expansion throughout the entire Southeast is feasible. The proposed expansion would require the firm to raise about $18.3 million in new capital. Because Randy’s currently has a debt ratio of 50% and because family members already have all their personal wealth invested in the company, the family would like to sell common stock to the public to raise the $18.3 million. However, the family wants to retain voting control. You have been asked to brief family members on the issues involved by answering the following questions.

a. What agencies regulate securities markets?

b. How are start-up firms usually financed?

c. Differentiate between a private placement and a public offering.

d. Why would a company consider going public? What are some advantages and disadvantages?

e. What are the steps of an initial public offering?

f. What criteria are important in choosing an investment bank?

g. Would companies going public use a negotiated deal or a competitive bid?

h. Would the sale be on an underwritten or best efforts basis?

i. The estimated pre-IPO value of equity in the company is about $63 million

and there are 4 million shares of existing shares of stock held by family members. The investment bank will charge a 7% spread, which is the difference between the price the new investor pays and the proceeds to the company. To net $18.3 million, what is the value of stock that must be sold? What is the total post-IPO value of equity? What percentage of this equity will the new investors require? How many shares will the new investors require? What is the estimated offer price per share?

What is a roadshow? What is book-building?
Describe the typical first-day return of an IPO and the long-term returns to IPO investors.
What are the direct and indirect costs of an IPO?
What are equity carve-outs?
Describe some ways other than an IPO that companies can use to raise funds from the capital markets.
What are some other investment banking activities? How did these increase investment banks’ risk?
What is meant by “going private”? What are some advantages and disadvantages? What role do private equity funds play?
Under what conditions would a firm exercise a bond call provision?
Explain how firms manage the risk structure of their debt with project financing.

Chapter 18: Public and Private Financing: Initial Offerings, Seasoned Offerings, and Investment Banks Mini Case

Book Title: Financial Management: Theory and Practice

© 2020 Cengage Learning Inc. All rights reserved. No part of this work may by reproduced or used in any form or by any means graphic, electronic, or mechanical, or in any other manner – without the written permission of the copyright holder.

Public and Private Financing Assignment Paper

RUBRIC

Excellent Quality

95-100%

Introduction

45-41 points

The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.

Literature Support

91-84 points

The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.

Methodology

58-53 points

Content is well-organized with headings for each slide and bulleted lists to group related material as needed. Use of font, color, graphics, effects, etc. to enhance readability and presentation content is excellent. Length requirements of 10 slides/pages or less is met.

Average Score

50-85%

40-38 points

More depth/detail for the background and significance is needed, or the research detail is not clear. No search history information is provided.

83-76 points

Review of relevant theoretical literature is evident, but there is little integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are included. Summary of information presented is included. Conclusion may not contain a biblical integration.

52-49 points

Content is somewhat organized, but no structure is apparent. The use of font, color, graphics, effects, etc. is occasionally detracting to the presentation content. Length requirements may not be met.

Poor Quality

0-45%

37-1 points

The background and/or significance are missing. No search history information is provided.

75-1 points

Review of relevant theoretical literature is evident, but there is no integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are not included in the summary of information presented. Conclusion does not contain a biblical integration.

48-1 points

There is no clear or logical organizational structure. No logical sequence is apparent. The use of font, color, graphics, effects etc. is often detracting to the presentation content. Length requirements may not be met