Capital Market Conditions Can Affect the Timing of a New

question 16

Multiple Choice

Capital market conditions can affect the timing of a new equity issue because:

• A)Issuing new equity may be harder when stock prices are rising.
• B)Issuing new equity may be easier when stock prices are rising.
• C)Issuing new equity may be harder when stock prices are falling.
• D)B and C

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Definitions:

Pure Play Method

A valuation method that compares a company to others within the same industry or sector with a single focus or product line.

Firm's Cost of Capital

The minimum return that a company must earn on its investments to maintain its market value and satisfy its creditors and investors.

Specific Division

A distinct business unit within a larger organization, often focused on a particular product line or market segment.

Risk Averse Manager

A manager who prioritizes minimizing risks in decision-making and strategy, favoring safer investments with potentially lower returns.