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.
Answer to relevant QuestionsState four important implications of the EMH for investors and two implications for corporate officers.Parker Investments Inc. has just completed an investigation of strong form efficiency in the Canadian stock market and has concluded that its evidence is statistically significant but not economically significant. Explain to ...Randy’s Rowboats Ltd. purchased and began to use its first six rowboats for a total cost of $2,400. Randy believes the boats can be used for five years, providing the company with equal value each year. After five years, ...A firm had retained earnings of $8,000 at the beginning of the year. Its net income for the year was $9,300, and its dividend payout ratio is 25 percent. What are its retained earnings at the end of the year?Prince Rupert Fly ‘n’ Fish Inc. purchases one small plane in its first year of business for $70,000. In year 2, it purchases another plane for $90,000. Find the UCC at the end of year 3 if the CCA rate for aircraft is 25 ...
Post your question