Question

What do Brealey-Myers-Allen recommend if you believe your company’s shares are mispriced?

      a.   If over-priced, don’t sell shares to invest in negative-NPV projects.

      b.   If under-priced, don’t sell shares at depressed prices because it will hurt your existing shareholders.

      c.   Brealey-Myers-Allen do not believe that shares are ever incorrectly priced by the market.

      d.   More than one of the above

      e.   None of the above

Answer 1

Brealey-Myers-Allen do not believe that shares are ever incorrectly priced by the market because they advocates that always Trust the market price and don't ever think that you are smarter than the market and you can predict the prices better than others.

Rest of the options are incorrect, because they never advocates anything regarding mispricing.

So, correct answer is option (C)Brealey-Myers-Allen do not believe that shares are ever incorrectly priced by the market.