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Fundamentals of Corporate Finance by Robert Parrino

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13

How Firms Raise Capital

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Learning Objectives

images Explain what is meant by bootstrapping when raising seed financing and why bootstrapping is important.

images Describe the role of venture capitalists in the economy and discuss how they reduce their risk when investing in start-up businesses.

images Discuss the advantages and disadvantages of going public and compute the net proceeds from an IPO.

images Explain why, when underwriting new security offerings, investment bankers prefer that the securities be underpriced. Compute the total cost of an IPO.

images Discuss the costs of bringing a general cash offer to market.

images 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 rather than selling securities ...

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