Match the Term with Its Definition

question 64

Multiple Choice

Match the term with its definition.
-The first sale of shares of a company's stock to the public

• A)build-up LBO
• B)business broker
• C)bust-up LBO
• D)double taxation
• E)employee stock ownership plan (ESOP)
• F)harvesting (exiting)
• G)initial public offering (IPO)
• H)leveraged buyout (LBO)
• I)management buyout (MBO)
• J)opportunity cost of funds
• K)private equity recapitalization
• L)seller financing

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Definitions:

Half-year Rule

The half-year rule is a tax regulation that allows only half the year's depreciation expense on newly acquired assets to be deducted in the first year.

Asset Class

A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations.

Sensitivity Analysis

Indicates exactly how much net present value will change in response to a given change in an input variable, other things held constant. Sensitivity analysis is sometimes called “what if” analysis because it answers this type of question.

Stand-alone Risk

The risk associated with a specific project or investment, considered independently from the broader company or portfolio risks.