Ch20 Test Bank + Answers – Entrepreneurial Finance And

Chapter 20 – Entrepreneurial finance and venture capital

MULTIPLE CHOICE

1. Entrepreneurial growth companies usually:

REF: 20.2 Venture Capital and Private Equity Financing NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

2. Formal business entities with full-time professionals who seek out and fund promising ventures are:

REF: 20.2 Venture Capital and Private Equity Financing NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

3. With few exceptions over time, __________ have generally provided more total funding to entrepreneurial companies each year.

REF: 20.2 Venture Capital and Private Equity Financing NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

4. Which of the following institutional venture capital fund categories controls the dominate share of industry resources?

REF: 20.2 Venture Capital and Private Equity Financing NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

5. A rapidly growing source of new money for institutional venture capital funds is:

REF: 20.2 Venture Capital and Private Equity Financing NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

6. Pensions are well-suited to the institutional venture capital fund area of investing because pension fund managers:

REF: 20.2 Venture Capital and Private Equity Financing NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

7. A growing company seeks $30 million to develop and market its promising new technology. An institutional venture capital fund steps in with an $8 million initial investment. This is an example of:

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

8. Venture capitalists use staged financing:

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

9. If a venture capital investment contract provides for the protection of the venture capital group’s ownership stake if a company sells new equity under duress, then the contract has a(n):

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

10. The investment contract provision that gives a venture capital fund the right to compel a company to file with the SEC for a public offering is a(n):

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

11. Venture capital funding is usually not straight equity initially, but rather:

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

13. Why is the cancellation option a key aspect of staged financing?

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

14. Which of the following will make it more likely for an entrepreneur to receive funding on more attractive terms?

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

Use the following information to answer questions 15 to 17.

It’s Gonna Be Big (IGBB) is seeking venture capital investment of $8 million. The founder and the venture capital fund agree that the company is worth $15 million today, and the venture capital investor asserts it requires a 35% (compounded annually) expected return. IGBB and the venture capital investor foresee an IPO in four years, at which time IGBB is expected to be valued at $90 million.

15. What share of IGBB’s equity is necessary for the venture capital investor to achieve its required return?

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

16. If the venture capital investor pushes for a 40% per year expected return, what share of IGBB’s equity will it receive in exchange for its $8 million investment?

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

17. Suppose the venture capital investor’s share of the equity in IGBB is 25% and that the company will be valued at $120 million in four years at the IPO. What annual (compounded) return did the venture capital investor earn?

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

Use the following information to answer questions 18 to 20.

Pickswinners Venture Fund invested $10 million five years ago in Robotronics Co. The fund received 6 million shares of convertible preferred share, each of which can be converted into three ordinary shares. Robotronics is now set to complete an IPO, and its shares are being priced at $40 each. Pickswinners will convert its preferred shares to ordinary shares at the IPO and will sell its shares along with Robotronics. The investment banking company handling the IPO will charge an 8% underwriting fee.

18. If Pickswinners’ ordinary share position represents 40% of Robotronics’ equity, how many shares are being offered in the IPO?

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

19. What proceeds does Pickswinners expect to receive?

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

20. What is the annual (compounded) return on Pickswinners’ investment?

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

21. Palooka Products negotiates a venture capital investment contract, receiving $5 million today and with the expectation that Palooka will seek an IPO in five years with an expected value of $50 million. If the venture capital investor requires a 40% expected return, what share of Palooka Products’ equity does it accept in exchange for its $5 million investment?

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

22. China has one of the fastest growing and potentially largest economies in the world, yet there is very little or no private equity investment. Why?

REF: 20.1 The Challenges of Financing Entrepreneurial Growth Companies

NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

23. Which country shows a great potential for future private equity investment?

REF: 20.4 International Markets for Venture Capital and Private Equity

NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

24. The financing provided for equity investments in rapidly growing private companies is called:

REF: 20.2 Venture Capital and Private Equity Financing NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

25. Among the possible exit strategies employed by venture capitalists, which of the following describes the redemption option?

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

26. A wealthy individual who makes private equity investments on an ad hoc basis is called a(n):

REF: 20.2 Venture Capital and Private Equity Financing NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

27. John Smith seeks $15 million from a VC fund. John and the VC agree that the company should be ready to go public in eight years. At that time the company should have a net income of $7.25 million. If comparable companies are expected to be trading at a P/E ratio of 23, what will be the company’s market capitalisation at the time of the IPO?

23(7.25) = 166.75 million

PTS: 1 DIF: E

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

28. John Smith seeks $17 million from a VC fund. John and the VC agree that the company should be ready to go public in eight years. At that time the company should have a market capitalisation of $368.75 million. If the VC requires a 48% return on its investment, what is the VC’s stake at the time of the IPO?

17(1.48)⁸ = 391.33

PTS: 1 DIF: E

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

29. John Smith seeks $17 million from a VC fund. John and the VC agree that the company should be ready to go public in eight years. At that time the company should have a market capitalisation of $468.75 million. If the VC requires a 48% return on its investment, what percentage of the company will the VC receive for its $15 million investment?

17(1.48)⁸ = 391.33

391.33/468.75 = 0.8349

PTS: 1 DIF: M

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

Use the following information to answer questions 30 to 34.

Miller Venture Capital made a $5 million investment in Bavarian Sausage Technology (BST) eight years ago and in return received 1 million convertible preferred shares that can be converted into 3 million ordinary shares. After all shares have been converted BST will have 15 million shares outstanding. In addition, the company is planning on issuing an additional 3 million shares in an IPO.

30. Refer to Miller Venture Capital. What percentage of BST’s ordinary shares will Miller own after the IPO?

3/18 = 0.1667

PTS: 1 DIF: E

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

31. Refer to Miller Venture Capital. If the value of a BST share is $20 at the end of the first trading day, what is the value of Miller’s investment?

3 000 000(20) = 60 000 000

PTS: 1 DIF: E

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

32. Refer to Miller Venture Capital. If BST’s share trades at $20 at the end of the first trading day, what is the annual return on Miller’s investment?

3 000 000(20) = 60 000 000

60 000 000 = 5 000 000(1 + r)⁸

r = 0.3643

PTS: 1 DIF: M

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

33. Miller Venture Capital Fund wants to average a 38.375% return on its investments. Of the 15 total investments, 5 have failed (i.e. a return of –100%) and 7 have generated a zero return. Two other projects yielded a return of 78% and 88%, respectively. What has to be the return on the last outstanding investment for Miller to reach its investment goal?

0.38375 = 5(–1) + 7(0) + 0.78 + 0.88 + r)/15

r = 9.153

PTS: 1 DIF: M

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

34. Miller Venture Capital Fund wants to average a 60% return on its investments. Of the 15 total investments, five have failed (i.e. a return of –100%) and seven have generated a zero return. What has to be the average return on the three outstanding investments for Miller to reach its investment goal?

0.60 = [5(–1) + 7(0) + 3(r)]/15

r = 4.6667

PTS: 1 DIF: M

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

35. John Smith seeks $7.5 million from a VC fund. John and the VC agree that the company should be ready to go public in four years. At that time the company should have a net income of $4.75 million. If comparable companies are expected to be trading at a P/E ratio of 20, what will be the company’s market capitalisation at the time of the IPO?

4.75 million(20) = 95 million

PTS: 1 DIF: E

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

36. John Smith seeks $8.5 million from a VC fund. John and the VC agree that the company should be ready to go public in four years. At that time the company should have a market capitalisation of $254.35 million. If the VC requires a 58% return on its investment, what will be its stake at the time of the IPO?

8.5(1.58)⁴ = $52.97

PTS: 1 DIF: E

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

37. John Smith seeks $8.5 million from a VC fund. John and the VC agree that the company should be ready to go public in four years. At that time the company should have a market capitalisation of $146.75 million. If the VC requires a 58% return on its investment, what percentage of the company will it receive for its $7.5 million investment?

8.5(1.58)⁴ = 52.97

52.97/146.75 =  0.3609

PTS: 1 DIF: M

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

Use the following information to answer questions 38 to 40.

Where Is My Money Professional Venture Capital (WIMMP) made a $10 million investment in Bavarian Sausage Technology (BST) five years ago and in return received 2.5 million convertible preferred shares, each of which can be converted into 1.5 ordinary shares. After all shares have been converted, BST will have 22.5 million shares outstanding. In addition, the company is planning on issuing an additional 5 million shares in an IPO.

38. What percentage of BST’s ordinary shares will WIMMP own after the IPO?

2.5 million(1.5) = 3.75 million

3.75/27.5 = 0.1364

PTS: 1 DIF: M

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

39. If the value of a BST share is $21.50 at the end of the first trading day, what is the value of WIMMP’s investment?

2.5 million(1.5) = 3.75 million

3.75 million(21.50) = 80.625 million

PTS: 1 DIF: M

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

40. If a BST share trades at $21.50 at the end of the first trading day, what is the annual return on WIMMP’s investment?

2.5 million(1.5) = 3.75 million

3.75 million(21.50) = 80.625 million

80.625 million = 10 million(1 + r)⁵

r = 0.5181

PTS: 1 DIF: M

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

41. Al Bert seeks $15 million from a VC fund. Al and the VC agree that the company should be ready to go public in six years. At that time the company should have a net income of $7.5 million. If comparable companies are expected to be trading at a P/E ratio of 15, what will be the company’s market capitalisation at the time of the IPO?

7.5(15) = 112.5

PTS: 1 DIF: E

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

42. Al Bert seeks $17 million from a VC fund. Al and the VC agree that the company should be ready to go public in six years. At that time the company should have a market capitalisation of $161.1 million. If the VC requires a 58% return on its investment, what is the its stake at the time of the IPO?

17(1.58)⁶ = 264.48

PTS: 1 DIF: E

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

43. Al Bert seeks $17 million from a VC fund. Al and the VC agree that the company should be ready to go public in six years. At that time the company should have a market capitalisation of $282.2 million. If the VC requires a 58% return on its investment, what percentage of the company will the VC fund receive for its $15 million investment?

17(1.58)⁶ = 264.48

264.48/282.2 = 0.9372

PTS: 1 DIF: M

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

44. ALOTACASH Venture Capital Fund wants to average a 58% return on its investments. Of the 12 total investments, 3 have failed (i.e. a return of –100%), and 6 generated a zero return. Two other projects yielded a return of 70% and 83%, respectively. What has to be the return on the last outstanding investment for ALOTACASH to reach its investment goal?

0.58 = [3(–1) + 6(0) + 0.75 + 0.80 + r]/12

r = 8.14

PTS: 1 DIF: M

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

45. ALOTACASH Venture Capital Fund wants to average a 58% return on its investments. Of the 12 total investments, 3 have failed (i.e. a return of –100%) and 6 generated a zero return. What has to be the average return on the last three outstanding investments for ALOTACASH to reach its investment goal?

0.58 = [3(–1) + 6(0) + 3(r)]/12

r = 3.32

PTS: 1 DIF: M

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

46. ALOTACASH Venture Capital Fund currently has its money tied up in 12 investments. Of those investments, three are expected to fail (i.e. a return of –100%), and six are expected to generate a zero return. The three remaining projects are supposed to yield a return of 70%, 83% and 167%, respectively. What is the average return on ALOTACASH’s investments?

[3(–1) + 6(0) + 0.70 + 0.83 + 1.67]/12 = 0.0167

PTS: 1 DIF: E

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

47. Which of the following methods of financing is most likely to be used for a high-technology entrepreneurial company?

REF: 20.1 The Challenges of Financing Entrepreneurial Growth Companies

NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

48. Modern venture capital is defined as a professionally managed pool of money raised:

REF: 20.2 Venture Capital and Private Equity Financing NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

49. Which type of venture capital companies dominates the industry?

REF: 20.2 Venture Capital and Private Equity Financing NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

50. Venture Fund A focuses on startup technology companies, while Venture Fund B focuses on middle-stage technology companies. Which company would require the highest returns on its investments?

REF: 20.2 Venture Capital and Private Equity Financing NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

REF: 20.2 Venture Capital and Private Equity Financing NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

51. As a limited partner in a venture capital limited partnership, today you committed to investing $70 million dollars. What amount must you contribute immediately?

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

52. Most venture capital companies invest capital in order to purchase:

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

53. You are a venture capitalist who is going to invest $10 million dollars today in a company that is projected to be worth $100 million in four years when it is expected to have an IPO. If you require a 40% annual return on investments with this kind of risk, then what portion of the company’s equity should you own after the investment?

10 million × (1.4)⁴ = 38 416 000

38 416 000/100 000 000 = 38.42%

PTS: 1 DIF: M

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

54. You are a venture capitalist who is going to invest $7 million dollars today in a company that is projected to be worth $200 million in six years when it is expected to have an IPO. If you require a 35% annual return on investments with this kind of risk, then what portion of the company’s equity should you own after the investment?

7 million × (1.35)⁴ = 42 374 116

42 374 116/200 000 000 = 21.12%

PTS: 1 DIF: M

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

55. You are a venture capitalist who is approached by a company that is willing to sell you 30% of its ordinary shares. You believe the company will be worth $800 million dollars when it has its IPO in five years. If you require a 50% return on investments with this company’s risk characteristics, what amount will you have to invest today in order to purchase 30% of the company’s ordinary shares?

800 million/(1.5)⁵ = 105 349 794

105 349 794 × 0.3 = 31 604 938

PTS: 1 DIF: H

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

56. You are a venture capitalist who can invest only $10 million dollars in a company today. The company is expected to be worth $100 million in five years when it has its IPO. If you require 50% ownership of the company’s ordinary shares at the time of the IPO, then what is your annualised rate of return on this investment?

100 million × 0.5 = 50 million of value will be owned in five years

10 million × (1 + r)⁵ = 50 million

r = 0.3797

PTS: 1 DIF: H

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Analytic skills

LOC: acquire knowledge of financial markets and interest rates

57. Which type of public market is good for the future of entrepreneurial companies as they mature into potential IPOs?

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

58. Which of the following is the most popular exit strategy that VCs use?

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

59. Which of the following is noted for having the largest amount of venture capital invested in its companies?

REF: 20.4 International Markets for Venture Capital and Private Equity

NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

60. Which country has been the largest recipient of VC financing as a percentage of GDP?

REF: 20.4 International Markets for Venture Capital and Private Equity

NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

61. Once starting a new business, an entrepreneur should concentrate on:

REF: 20.2 Venture Capital and Private Equity Financing NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

62. Which group is the largest source of external seed and startup capital for US businesses?

REF: 20.2 Venture Capital and Private Equity Financing NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

63. One principle of venture capital funding is:

REF: 20.2 Venture Capital and Private Equity Financing NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

64. The key difference between valuing VC investments and other kinds of investments is that the expected returns:

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

65. Which of the following statements concerning the term venture capital is true?

REF: 20.4 International Markets for Venture Capital and Private Equity

NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

66. ________________ are agreements between venture capital investors and portfolio-company management that allocate ownership stakes and voting rights to venture capitalists.

REF: 20.2 Venture Capital and Private Equity Financing NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

67. ________________ are a contract terms that adjust the par value of share venture capitalists downward if the company sells new share.

REF: 20.2 Venture Capital and Private Equity Financing NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

68. ________________ are agreements giving venture capitalists the right to demand that a portfolio company’s managers arrange a public offering of shares in the company.

REF: 20.2 Venture Capital and Private Equity Financing NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

69. __________ are agreements giving venture capitalists the right to participate in any sale of shares that company’s manager might arrange for themselves.

REF: 20.2 Venture Capital and Private Equity Financing NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

70. ________________ give venture capitalists the right to force a company to buy back shares held by the venture capitalists.

REF: 20.2 Venture Capital and Private Equity Financing NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

71. ________________ are formal business entities with full-time professionals dedication to seeking out and funding promising ventures.

REF: 20.2 Venture Capital and Private Equity Financing NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

72. In the US, ________________ are federally chartered corporations established as a result of the Small Business Administration Act of 1958.

REF: 20.2 Venture Capital and Private Equity Financing NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

73. __________ are subsidiaries or standalone companies established by non-financial corporations to gain access to emerging technologies.

REF: 20.2 Venture Capital and Private Equity Financing NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

74. In recent history, the largest portion of venture capital investments in the US have occurred:

REF: 20.2 Venture Capital and Private Equity Financing NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

75. A study by the National Venture Capital Association found that sales of venture companies during the 1970–2005 period were:

REF: 20.2 Venture Capital and Private Equity Financing NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

76. Which of the following statements concerning the profitability of venture capital investments is false?

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

77. Which of the following statements is false?

REF: 20.4 International Markets for Venture Capital and Private Equity

NAT: Reflective thinking

LOC: acquire knowledge of financial markets and interest rates

SHORT ANSWER

1. What is a redemption option?

PTS: 1 DIF: E

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

2. Define staged financing.

PTS: 1 DIF: E

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

3. What are ratchet provisions?

PTS: 1 DIF: E

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies

4. What is an angel capitalist?

PTS: 1 DIF: E

REF: 20.2 Venture Capital and Private Equity Financing

5. Define venture capital.

PTS: 1 DIF: E

REF: 20.2 Venture Capital and Private Equity Financing

6. What is carried interest?

PTS: 1 DIF: E

REF: 20.3 The Organisation and Operations of Venture Capital and Private Equity Companies