Which of the Following Statements Is FALSE

question 25

Multiple Choice

Which of the following statements is FALSE?

• A)Once the issue price (or offer price)is set,underwriters may invoke another mechanism to protect themselves against a loss-the over-allotment allocation.
• B)Before the offer price is set,the underwriters work closely with the company to come up with a price range that they believe provides a reasonable valuation for the firm.
• C)Before an IPO,the company prepares the final registration statement and final prospectus containing all the details of the IPO,including the number of shares offered and the offer price.
• D)A "road trip" is where senior management and the lead underwriters travel around the country (and sometimes around the world)promoting the company and explaining their rationale for the offer price to the underwriters' largest customers-mainly institutional investors such as mutual funds and pension funds.

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Definitions:

Annual After-Tax Cash Flow

The amount of money a company has left after paying all its taxes and accounting for all its expenses and income over a year.

Depreciation

The allocation of the cost of a tangible asset over its useful life, reflecting the decrease in value over time.

Tax Rate

The percentage at which an individual or corporation is taxed by the government.

Net Present Value

The calculation of the present value of an investment's expected cash inflows minus the initial investment cost, used to analyze the profitability of a project.