Stockholders of a company may be reluctant to finance expansion through issuing more equity because
A) leveraging with debt is always a better idea.
B) their earnings per share may decrease.
C) the price of the stock will automatically decrease.
D) dividends must be paid on a periodic basis.

Question

Quizplus · Accepted Answer

Stockholders may be hesitant to finance expansion through issuing more equity because it dilutes the ownership and can lead to lower earnings per share, which can negatively impact the stock price.

Stockholders of a Company May Be Reluctant to Finance Expansion