According to Jensen’s free cash flow theory, the stock price falls when it is announced that the company will issue common stock because
A. The company is signaling that the stock is overpriced.
B. The stock issuance will cause dilution.
C. Shareholders are annoyed by the stock Issuance, because they have to come up with money to buy the offering.
D. The company is expected to waste the money it raises, and the debt level falls, low pressure on management to be frugal.
E. The company is not doing what will save shareholders taxes.
F. The cash needed to pay out dividends on the new shares is a burden.
Jensen’s free cash flow theory is generally applicable to
A. All public corporations
B. Only large corporations
C. High-growth corporations
D. Closely held corporations
E. Corporations where management and shareholders disagree on whether the company should declare a dividend versus repurchasing stock
F. Corporations that repeatedly split their stock
G. Corporations that generate more cash than needed for positive NPV projects