Empirical Evidence Suggests That Upon Announcement of a New Equity

question 41

Multiple Choice

Empirical evidence suggests that upon announcement of a new equity issue, current share prices generally:

• A)drop, perhaps because the new issue reflects management's view that ordinary equity is
• Currently overvalued.
• B)remain about the same since an efficient market anticipates a new equity issue.
• C)increase, perhaps because the issues are associated with positive NPV projects.
• D)increase, because the market supply is always less than demand.
• E)increase, because underwriters exercise their green shoe option.

---

Definitions:

Common Law

An accumulation of legal principles formed by historical decisions made in courts rather than documented statutes.

Livable Condition

Livable condition refers to a state of housing or accommodation that meets basic living standards and conditions for safety, health, and comfort.

State Statutes

Laws established by a state's legislative body that govern matters within the state's jurisdiction.

Nonpayment of Rent

The failure to fulfill the obligation of paying rent as stipulated in a rental agreement or lease.