A COMMENT ON THE COST OF NEW ISSUES OF COMMON STOCK
作者:
Gary A. Benesh,
Stephen E. Celec,
期刊:
Decision Sciences
(WILEY Available online 1984)
卷期:
Volume 15,
issue 1
页码: 137-141
ISSN:0011-7315
年代: 1984
DOI:10.1111/j.1540-5915.1984.tb01201.x
出版商: Blackwell Publishing Ltd
关键词: Cost of Capital;Capital Budgeting;and Financial Planning and Modeling.
数据来源: WILEY
摘要:
ABSTRACTAccording to the constant growth model and perceived finance theory, the cost of new external equity exceeds the cost of retained earnings due to flotation costs and underpricing. Carlson and Dietz [1] have recently argued that the constant growth model is operationally inadequate whenever the net proceeds from the issuance of a new share differ from book value. Specifically, they contend that the cost of new external equity is less than the cost of retained earnings whenever the net proceeds from a new share exceed book value. We show that these conclusions stem from an error in interpretation and therefore that the constant growth model is valid regardless of the relationship between market prices and book value.
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