Question

two mutually exclusive projects have the following positive npvs and project lives. project npv life project a $ 5,000 3 years project b $ 6,500 5 years if the cost of capital were 15 percent, which project would you accept? a. project a, because it has higher equivalent annual annuity (eaa) b. project b, because it has higher (eaa) c. project a, because its npv can be earned more quickly d. project b, because it has higher npv answer a 10. what signal is sent to the market when a firm decides to issue new stock to raise capital? a. bond markets are overpriced. b. stock price is too high. c. stock price is too low. d. the company management is very optimistic about the future cash flow growth of the company answer b

Answer 1

When a firm decides to issue new stock to raise capital, it signals that the stock price is too high. This indicates that the company management is very optimistic about the future cash flow growth of the company. Therefore, the correct option is B.

Step-by-step explanation:

The correct answer is b. stock price is too high. When a firm decides to issue new stock to raise capital, it signals that the stock price is too high. This indicates that the company management is very optimistic about the future cash flow growth of the company.