Empirical evidence suggests that the market price of a firm's existing shares are most likely to decline upon the announcement of a new equity issue. Which of the following have been advanced as possible explanations for this phenomenon?

I. Issuing new equity requires the firm to incur substantial flotation costs.

II. An equity issue is a signal that the firm may have too little liquidity.

III. Management will issue equity only when it believes that existing shares are undervalued.

A) I only

B) III only

C) I and II only

D) II and III only

E) I, II, and III