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Exam Code: HP2-I24

Exam Name: Selling HP Print Support Services (Page MPS) 2021

Version: V15.35

Q & A: 208 Questions and Answers

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NEW QUESTION: 1
If you know that your firm is facing relatively poor prospects but needs new capital, and you know that investors do not have this information, signaling theory would predict that you would
A. issue equity to share the burden of decreased equity returns between old and new shareholders.
B. postpone going into capital markets until your firm's prospects improve.
C. be indifferent between issuing debt and equity.
D. convey your inside information to investors using the media to eliminate the information asymmetry.
E. issue debt to maintain the returns of equity holders.
Answer: A
Explanation:
Explanation/Reference:
Explanation:
The announcement of a stock offering is generally taken as a signal that the firm's prospects as seen by its management are not bright.

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