Explain Why Equity Is a More Expensive Source of Funds

question 23

Essay

Explain why equity is a more expensive source of funds for a firm.

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Definitions:

Seasoned Equity Offering

The process by which a publicly-traded company issues additional shares of stock to raise capital, typically after the initial public offering.

Initial Public Offering

The first time that the stock of a private company is offered to the public.

Secondary-market Transaction

The buying and selling of previously issued securities, such as stocks and bonds, among investors without involving the issuing companies.

Block Transactions

Large-scale securities trades on stock markets, usually involving at least 10,000 shares or bonds.