Why should managers assume they will receive a fair price for any new shares that their firm issues?

Question

Quizplus · Accepted Answer

Financial markets are highly competitive environments where buyers and sellers compete to determine the fair market price for securities. Therefore, managers should assume that they will receive a fair price for any new shares issued, based on supply and demand dynamics and the overall market conditions. Par value is a nominal amount assigned to a share and is not indicative of its fair market price. The NPV of an investment depends on the assumptions made about cash flows and discount rates and may not always be positive. New share prices are regulated to some extent but they are still subject to market conditions and may deviate from the theoretical value based on regulatory factors.

Why Should Managers Assume They Will Receive a Fair Price