Question
If a firm issues new equity, investors will infer that the firm's outstanding stock must be Blank______.
Multiple choice question.
undervalued
overvalued
priced correctly
Multiple choice question.
undervalued
overvalued
priced correctly
Answers
GPT-4o mini
If a firm issues new equity, investors will infer that the firm's outstanding stock must be **overvalued**.
This inference is based on the idea that firms typically issue new equity when they believe their stock is overvalued, as they can raise more capital by selling shares at a higher price.
This inference is based on the idea that firms typically issue new equity when they believe their stock is overvalued, as they can raise more capital by selling shares at a higher price.