Larger Issues of New Common Stock Can Cause ________ to Increase

question 7

Multiple Choice

Larger issues of new common stock can cause ________ to increase.

• A) flotation costs
• B) the investor's required rate of return
• C) the stock price
• D) the tax rate

---

Definitions:

Dividend Irrelevance

Dividend Irrelevance theory suggests that a company's dividend policy has no effect on either its value or its cost of capital, according to Modigliani and Miller.

Growth Created Value

The increase in value that a company achieves through the expansion of its operations or activities.

Future

Financial contracts obligating the buyer to purchase an asset or the seller to sell an asset, such as a physical commodity or a financial instrument, at a predetermined future date and price.

Clientele Effect

The theory that a company's stock price changes according to the demands and preferences of its existing shareholder base.