If management perceives the current market equity value of their shares to be OVER valued,then management should:
A)issue new shares later after stock prices have come down so as not to further increase the price dilution found when issuing shares.
B)issue new shares now to take advantage of the market mispricing,but only if they believe the market is at least momentarily inefficient.
C)wait to issue until prices are UNDER valued so that there option values increase more rapidly.However,they would only do this if they have the best interest of shareholders in mind.
D)recommend that existing shareholders buy more shares at current market prices because they are so valuable.

Question

Quizplus · Accepted Answer

If management perceives the current market equity value of their shares to be overvalued, it makes sense to issue new shares now to capitalize on the higher prices. This is based on the assumption that the market is momentarily inefficient, allowing the company to raise capital more effectively than it could if the shares were fairly valued or undervalued.

If Management Perceives the Current Market Equity Value of Their