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(b) The founder of Firm A started the firm-five years ago. The business has been profitable. Today she is looking to sell add
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Answer #1

Yes, it's possible.

A firm will undertake new investment opportunities only if return > cost of capital used to fund such new opportunities. Since the proceeds from equity issuance is going to be used towards investment opportunities, such opportunities must produce returns in excess of the cost at which equity is being issued.

In case such returns > cost of capital, the provider of the capital i.e. equity investors will generate returns more than the capital market rate of return expected on the security.

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