Suppose that the production facilities of a corporation are damaged as a result of an earthquake. The
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Suppose that the production facilities of a corporation are damaged as a result of an earthquake. The corporation estimates that repairing the facilities will cost the company £1 million annually for 3 years. What is the impact of this earthquake on the stock price of the corporation, if the corporation is 100% equity financed, its equity cost of capital is 5%, and it has 1 million shares outstanding? Hearing the news about the earthquake could you make a profit?
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