Patterson Incorporated is a biotechnology firm that specializes in developing new drugs. It is all - equity
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Question:
Patterson Incorporated is a biotechnology firm that specializes in developing new drugs.
It is allequity financed and has million shares currently trading at $ per share.
There are no corporate or personal taxes. Give the amount by which share price changes
when the following events occur. Assume that markets are weak and semistrong
efficient.
a At date it is announced, as anticipated by investors, that the level of dividends paid
over the past five years will be maintained so that in three weeks time the exdividend
date ie the date when owners of stock become entitled to the dividend for the total
dividends of $ million will occur.
b At date a new drug PTA is discovered. This discovery is not anticipated by
investors. The total present value of the expected profits generated by the drug is $
million. The information about the discovery is not made public at this time.
c At date the exdividend date for the total dividends of $ million occurs.
d At date the discovery of the new drug PTA is made public.
e At date the discovery is made and announced that a new antibiotic drug Thintac has
serious side effects and so will be unable to obtain FDA approval. Investors had
anticipated that this drug would have expected profits with a total present value of $
million.
Related Book For
Managerial accounting
ISBN: 978-0471467854
1st edition
Authors: ramji balakrishnan, k. s i varamakrishnan, Geoffrey b. sprin
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