Which of the following statements is incorrect about the methods of raising capital? I. In comparison to debt issuance expenses, the total direct costs of initial equity issues are more likely to be considerably smaller. II. Empirical evidence suggests that initial new equity issues are generally underpriced by investor excitement concerning a new issue. III. One of the common ways for start-up companies to access capital is through convertible securities issued by private equity or venture capital funds. IV. Empirical evidence suggests that upon the announcement of a seasoned equity issue, current stock prices generally drop. a. None of the other choice combinations are correct. b. IV only c. I only d. I and III only e. II and IV only Please fully explain
Which of the following statements is incorrect about the methods of raising capital? I. In comparison to debt issuance expenses, the total direct costs of initial equity issues are more likely to be considerably smaller. II. Empirical evidence suggests that initial new equity issues are generally underpriced by investor excitement concerning a new issue. III. One of the common ways for start-up companies to access capital is through convertible securities issued by private equity or venture capital funds. IV. Empirical evidence suggests that upon the announcement of a seasoned equity issue, current stock prices generally drop. a. None of the other choice combinations are correct. b. IV only c. I only d. I and III only e. II and IV only Please fully explain
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Which of the following statements is incorrect about the methods of raising capital?
I. In comparison to debt issuance expenses, the total direct costs of initial equity issues are more likely to be considerably smaller.
II. Empirical evidence suggests that initial new equity issues are generally underpriced by investor excitement concerning a new issue.
III. One of the common ways for start-up companies to access capital is through convertible securities issued by private equity or venture capital funds.
IV. Empirical evidence suggests that upon the announcement of a seasoned equity issue, current stock prices generally drop.
a. None of the other choice combinations are correct.
b. IV only
c. I only
d. I and III only e. II and IV only
Please fully explain
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