RAISING EQUITY AND DEBT GLOBALLY

The optimal capital structure ___

•  Is the combination of debt and equity that yields the lowest cost of capital

• Within the same industry stays the same from country to country

• Is where the debt ratio remains fixed, but the amount of capital to be obtained changes

• All of the above statements are true

For most firms, the cost of capital decreases to a low point as the firm ________ debt financing. At some point beyond this optimal level, the cost of capital increases as the amount of debt ________

• decreases; increases

• increases; decreases

• increases; increases

• decreases; decreases

Multinational companies may lower their cost of capital mainly because

• None of the above

• Have access to a wider range of capital markets

• They have political clout

• Tax advantages in different countries

A/An ________ is defined as one that is targeted at investors in a single country and underwritten in whole or part by investment institutions from that country

• Directed public share issue

• Euroequity public issue

• Strategic alliance

• SEC rule 144a placement

The public pathway to raise equity capital outside of its home market includes the following EXCEPT

• Euroequity issue

• Strategic Partner/Alliance

• Shares sold to a specific market or exchange

• Seasoned offering

Which of the following is a characteristic of an euroequity issue?

• An initial public offering of euro denominated securities

• The issuers are located in Europe

• The investors are located in Europe

• Is an offering on multiple exchanges in multiple countries at the same time

 Each ADR represents ________ of the shares of the underlying foreign share

• A multiple

• 100

• 1

• ADRs have nothing to do with foreign stocks

Private equity funds (PEF) differ from traditional venture capital (VC) funds in that

• VC operates mainly in less-developed countries while PEF do not

• VC typically invests in family businesses whereas PEF do not

• VC is almost unavailable to emerging markets while PEF capital is available

• All of the above are true

In addition to gaining liquidity, which of the following could also be considered a legitimate reason for cross-listing equity?

• Increase its share price

• Increase the firm’s visibility and acceptance

• Establish a liquid secondary market for shares

• All of the above

The eurobond market owes its existence to all of the following reasons unique factors EXCEPT

• Free bond ratings

• The absence of regulatory interference

• Less stringent disclosure practices

• Favorable tax treatment