Fundamentals of Corporate Finance
11th Edition
ISBN: 9781259870576
Author: Ross
Publisher: MCG
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Textbook Question
Chapter 15.6, Problem 15.6ACQ
What are some possible reasons why the price of stock drops on the announcement of a new equity issue?
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How would changes in the general stock and bond markets lead to changes in the required rate of return on a firm’s stock?
In general, does the market view the announcement of a new stock issue to be a good signal?
Answer the following questions:
A. Explain why the price of many individual stocks still goes down, even when the overall stock market goes up.
b. How can you avoid the value of your stock from going down?
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- In some cases, stock price decreases on the announcement of equity repurchases. How would you explain this?arrow_forwardwhy does the price of individual stocks still goes down despite the stock market going uparrow_forwardWhat happens to the price of a stock when the stock goes “ex-dividend”? a) it decreases b) it doesn’t change c) it increases d) there is no relationship between dividends and stock pricesarrow_forward
- Explain which has a stronger effect on stock prices, the change in the interest rate or the unexpected change.arrow_forwardTo what extent does investor mood contribute to the observed fluctuations in stock prices? Explainarrow_forwardHow would you use these to evaluate whether or not a current stock price is perhaps to high (overpriced) or too low (underpriced).arrow_forward
- How will the change in required return influence the price of a stock? How will the dividend growth rate influence the price of a stock?arrow_forwardwhy does the price of many individual stocks still go down, even when the overall stock market goes up?arrow_forwardWhat can you expect to be different on the announcement date AND after the ex-dividend date when a stock price of a certain company drops after it declares dividends?arrow_forward
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