Which of the Following Is NOT Generally Considered a Cost

question 4

Multiple Choice

Which of the following is NOT generally considered a cost of going public?

• A)Underpricing: IPOs appear to be substantially underpriced.
• B)Competition: Now that the firm is more visible, industry rivals will compete more intensively.
• C)Issuance Costs: The typical underwriter spread for an IPO is 7% of the offering proceeds.
• D)Management's time in preparing for the offering.
• E)Loss of Control: New equityholders may press the firm to change its investment, financing, or dividend policies, and may also attempt to replace the firm's original management team.

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Definitions:

Comparative Advantage

The skill of any individual, enterprise, or country in producing a certain good or service with a lesser opportunity cost than that of their competitors.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision or choosing an action.

Production Possibilities

The various combinations of goods and services that can be produced in an economy with a given set of resources and technology.

Absolute Advantage

A situation where a producer can produce more goods using the same amount of resources or less than other producers.