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Why does the stock price tend to drop when firms announce a seasoned equity offering? a. Because it signals that the issuing firm could be

Why does the stock price tend to drop when firms announce a seasoned equity offering?

a. Because it signals that the issuing firm could be in financial trouble.

b. Because the new shares will dilute the earnings of existing shareholders and so the company stock cannot be worth the same amount anymore.

c. The price only drops when firms state that they intend to use the new funds to undertake projects that have a negative net present value.

d. Because investors know that the new issue is underpriced and so the existing shares must adjust to account for this

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