Reading 74: Alternative Investments-LOS g 习题精选 2011, investment, investing, valuation, capital

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Session 18: Alternative Investments
Reading 74: Alternative Investments

LOS g: Explain the stages in venture capital investing, venture capital investment characteristics, and challenges to venture capital valuation and performance measurement.

 

 

Venture-capital investing will appeal to investors who:

A) are willing to accept a high-risk profile and illiquidity.

B) have a short time horizon.

C) make investment decisions based on historical risk and return data.

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Venture capital investments are characterized by illiquidity and a high-risk profile. Venture capital is a long-term investment not suitable for investors with short time horizons. There is little historical data available for venture-capital investments, so investors who depend on such data to make decisions are not likely to invest in this arena.

[此贴子已经被作者于2011-4-2 11:28:11编辑过]

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The different stages of venture capital investing are generally grouped according to the:

A) rights and responsibilities of the investor.

B) liquidity of the investment.

C) stage of development of the venture.

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The stages of venture capital investment are categorized according to the point the venture is in the business cycle.

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The founders of the ABCD Corporation believe their idea for a new weight-loss pill will be tremendously successful. ABCD Corporation is currently seeking venture capitalists to invest in their company so they can do further research and hopefully someday develop their idea into a marketable product. This stage of venture capital investing can best be described as:

A) seed-stage.

B) first-stage.

C) formative-stage.

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First-stage financing is used to begin manufacturing and sales of a product. Formative-stage financing includes the seed-stage and the early-stage, but is too broad of a description for this situation. Seed-stage best describes this scenario, because ABCD is seeking financing to support product development and market research.

Note: there is some overlap between the stages, so read the question carefully.

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A manufacturing company would seek mezzanine financing in which of the following scenarios?

A) A company already producing and selling a product, seeking an initial expansion of operations.

B) A company ready for a major marketing campaign.

C) A company preparing for an initial public offering.

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All of the above scenarios are different stages of later-stage financing. A company ready for a major marketing campaign or a physical plant expansion is seeking third-stage financing. An initial expansion of operations describes second-stage financing. The capital provided to prepare for an initial public offering is at the mezzanine stage.

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A venture capitalist would typically do all of the following EXCEPT:

A) provide business expertise and confidentiality.

B) force the entrepreneur to carefully consider the viability of the project through the development of a business plan.

C) manage the company after it has gone public.

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Venture capitalists also provide risk capital.

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Which of the following is least likely a way in which venture capitalists create value?

A) Understanding the outside capital markets and helping start-ups acquire capital in the public debt and equity markets.

B) Are often able to identify undervalued investments due to specialization in the venture capitalist's area of expertise.

C) Provide contacts to accountants, lawyers, and investment bankers.

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Start-ups generally are not ready for the public equity markets (hence the venture capitalist) and are certainly not ready for the public debt markets. Venture capitalists provide value by not only providing money, but also contacts, guidance, advice, insight, etc.

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Which of the following is NOT among the three most important factors in valuing a venture capital investment?

A) Timing of exit.

B) Liquidity.

C) Expected payoff at exit.

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Illiquidity is a characteristic common to all venture capital investments, but is difficult to quantify valuing an investment. The timing and amount of the expected payoff at exit, adjusted for the probability of failure, are the three most important factors in the valuation of venture capital opportunities.

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