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Which of the Following Is NOT a Stated Reason Why

Question 6

Multiple Choice

Which of the following is NOT a stated reason why an internal capital market, managed by a firm's headquarters, may be superior to external financing?


A) External equity financing is problematic because of the information asymmetry problem.
B) Even if internal and external providers of capital have the same ability to monitor, internal providers will choose to monitor more intensely because they have residual control over the assets, and therefore get more of the gains from monitoring.
C) If one unit performs poorly, its assets can be redeployed efficiently.
D) Management is generally better at managing internal (vs.external) equity.

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