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An investment banker estimates that if a firm issues $500 million in equity the firms stock price would fall by 3% and that if the
An investment banker estimates that if a firm issues $500 million in equity the firms stock price would fall by 3% and that if the firm issues a convertible for the same amount the stock price would fall by 1.5%. Consequently, the investment banker recommends the firm to issue a convertible so that firm value for the current shareholders is preserved. Do you agree with the investment bankers recommendation? Why?
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