Question $2.$

Pacific Ltd is a medium sized publicly listed manufacturer that designs and produces metal roofs. Its reported earnings per share for $2020$ was $\backslash (\backslash$$ $12\mathrm{.}75\backslash )$ a share, versus $\backslash (\backslash$$ $13\mathrm{.}00\backslash )$ EPS in $2019.$ The $2020$ earnings announcement was publicly announced $9$ AM on Feb. $28,2021.$ For $2020,$ financial analysts had predicted $\backslash (\backslash$$ $11\mathrm{.}50\backslash )$ earnings a share. $(8$ marks$)$

$($a$)$ If you have no other information, would you expect a change in the price of Pacific's common stock on Feb $28\backslash (\{\}^\{\backslash$text $\{$th $\}\}\backslash ),2021?$ If so$,$ in what direction $($increase or decrease$)$ and why? Explain your answer with explicit reference to relevant terms and points from the scenario, and identify any assumptions you have made. $(4$ marks$)$

$($b$)$ If the deviation of actual earnings from expected earnings described in $($a$)$ is completely due to an increase in come because of a change in amortization policy, would you expect the ERC to be greater than $\backslash (1,1,0\backslash ),$ or less than $0?$ Explain your answer. $(2$ marks$)$

$($c$)$ If the deviation of actual earnings from expected earnings described in $($a$)$ is completely due to an increase in income from improving manufacturing efficiency, would you expect the ERC to be greater than $1,1,0,$ or less than $0?$ Explain your answer. $(2$ marks$)$