If investors are rational and managers are overoptimistic, how would the value of the firm change if management were to raise more money for new projects? Would it be worse if the firm raised equity? Substantiate your response.
Please use Welch I. (2009). Corporate Finance: An Introduction. Upper saddle River NJ: Prentice-Hall
In a situation in which investors are rational and managers are over optimistic, if management were to raise more money for new projects, the value of the firm would probably change for the better if the projects were successful investments by the firm that turned out to be profitable. In a case where the ...