Multiple Choice
What is the primary drawback of external equity?
A) External equity is expensive because it obligates the firm to pay dividends to shareholders.
B) Issuing additional shares of stock reduces the earnings per share of the company and usually the value of its shares of stock.
C) External equity is a complex and risky way to raise capital and is seldom used.
D) Issuing additional shares of stock has to be approved by existing stockholders who often will not approve.
Correct Answer:
Verified
Correct Answer:
Verified
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