ANSWERS: 1
  • In theory, a company can raise money via common equity as many times as they wish. However, shareholders suffer dilution each time a company issues new shares. The company benefits by creating optimal capital structure such that it minimizes its overall cost of capital. Shareholders benefit immediately and perpetually by the addition of liquidity to their investment. But, they also benefit when the company benefits, i.e. the company should employ the new capital such that they can generate greater returns for all shareholders going forward. If this occurs, the original and new shareholders will accumulate wealth via dividend payments and appreciation of the stock price.

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