All of the Following Are Advantages of an IPO EXCEPT

question 19

Multiple Choice

All of the following are advantages of an IPO EXCEPT:

• A) the market provides a market value for the firm's common stock.
• B) the original owners can reallocate their personal wealth away from the firm into more diversified portfolios.
• C) the market provides a transparent measure of firm performance which can attract more investors.
• D) IPOs are traditionally priced at a premium to cover the costs of the underwriters.

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Definitions:

Working Capital

The difference between a company's current assets and current liabilities, indicating the financial health and operational efficiency.

Payback Period

The duration needed to recoup the cost of an investment.

Straight-Line Depreciation

Straight-line depreciation is an accounting method of allocating the cost of a tangible asset over its useful life in equal annual amounts.

Net Present Value

A method used in capital budgeting to assess the profitability of an investment or project by calculating the difference between the present value of cash inflows and outflows.