Assume a Firm Issued Rights to Fund a New Project

question 4

Multiple Choice

Assume a firm issued rights to fund a new project.If this project immediately increases the market value per share,then:

• A)no dilution of ownership position can occur.
• B)the book value per share had to remain constant.
• C)the EPS will also immediately increase.
• D)the shareholders will be worse off than before,whether or not they participate in the offering.
• E)the firm has acted in the best interest of its pre-rights shareholders.

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Definitions:

Short-Term Memories

The phase of memory where small amounts of information can be stored for a short period of time.

Serial Position Effect

Tendency of information at the beginning and end of a body of information to be remembered more accurately than information in the middle of the body of information.

Unrelated Items

Objects or elements that have no logical connection or association with one another.

Recall Items

The process of retrieving previously learned information from memory without the aid of, or with very few external cues.