Question: On Monday the stock of the Wicker Company was trading

On Monday, the stock of the Wicker Company was trading at $25. The CEO was satisfied with this price as it reflected the prospects of the firm (future dividend growth and required rate of return). The firm’s scientists worked all Monday night to complete a top secret project, which will dramatically improve the quality of Wicker’s products and result in a huge increase in sales for the next 10 years. On Tuesday evening, you have dinner with the CEO (he is a client of yours) who is complaining that the “markets cannot be efficient” because the stock price of WC has not changed despite this dramatic change in the firm’s prospects. Provide the CEO with two different explanations about why there was no reaction on Tuesday.

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  • CreatedFebruary 25, 2015
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