Fundamentals of Corporate Finance, Second Edition
by Robert Parrino, David S. Kidwell, Thomas W. Bates
15
How Firms Raise Capital

Armin Weigel/dpa/©Corbis
Learning Objectives
Explain what is meant by bootstrapping when raising seed financing and why bootstrapping is important.
Describe the role of venture capitalists in the economy and discuss how they reduce their risk when investing in start-up businesses.
Discuss the advantages and disadvantages of going public and compute the net proceeds from an IPO.
Explain why, when underwriting new security offerings, investment bankers prefer that the securities be underpriced. Compute the total cost of an IPO.
Discuss the costs of bringing a general cash offer to market.
Explain why a firm that has access to the public markets might elect to raise money through a private placement.
Review some advantages of borrowing from a commercial bank ...
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