Finance Chapter 2

there will be some volatility in the stock price when the earnings report is released, but it is difficult to determine the impact on the stock price. However, the prices will eventually adjust to the news announcement.

A pharmaceutical company that it has received federal drug administration approval for new allergy drug that completely prevents hay fever. the consensus analyst forcers for the company's earnings per share (EPS) is $4.50, but insiders know that, with this new drug, earnings will increase and drive the EPS to $5.00. What will happened when the company releases its next earnings repot. Consider that there is a weak form of efficiency in the market.

The stocks price will increase and settle at new equilibrium level.

A pharmaceutical company that it has received federal drug administration approval for new allergy drug that completely prevents hay fever. the consensus analyst forecast for the company's earnings per share (EPS) is $4.50, but insiders know that, with this new drug, earnings will increase and drive the EPS to $5.00. What will happened when the company releases its next earnings repot. Consider that there is a weak-form efficiency in the markets.

Public owned corporation

Diusitech Inc. recently raised capitol through an initial public offering (IPO). Its stock can now be purchased on NYSE. the company is referred to as.

$60

Indigo Inc. is going public and issuing $150,000 shares of common stock. the capitol raised in the in the IPO will fund the company's proposed expansion. A Dutch auction is used to allocate shares in the Indigo IPO. the following table shows the number of shares requested by potential investors in each row. What should be the firm's IPO offer price.

equal to

The concept of market efficiency underpins almost all financial theory and decision models. when financial markets are efficient, the price of a security such as a share of a particular corporation's common stock-should be the present value estimate of the firms expected cash flows discounted by its appropriate rate of return (also called the intrinsic value of the stock).

False

The efficient markets hypothesis holds only if all investors are rational

$57

WAC inc. is going public and issuing 500,000 shares of common stock. The capitol raised in the IPO will fund the company's purpose expansion. A Dutch auction is used to allocate shares in the WAC IPO. the following table shows the number of shares requested by potential investors in each row. what should be the firm's IPO offer price?

$54

Wac Inc. is going public and issuing $500,000 shares of common stock. The capitol raised in the IPO will fund the company's proposed expansion. A Dutch auction is used to allocate shares in the WAC IPO. the following table shows the numbers of share requested by potential investors in each row. What should be the firm's IPO offer price?

semistrong form efficiency

almost all Finacial theory and decision model assume that the financial market are efficient. the informational efficiency of Finacial market determines the ability of investor to "beat" the market and earn excess (or abnormal) returns on their investments. If the markets are efficient, they will react rapidly as new relevant information becomes available. Finacial theorists have identify three levels of information efficiency that reflect what information is incorporated in stock prices. Identify the form of capitol market efficiency under the efficient market hypothesis based on this statement. Current market prices reflect all relevant publicly available information.

strong form efficiency

almost all Finacial theory and decision model assume that the financial market are efficient. the informational efficiency of Finacial market determines the ability of investor to "beat" the market and earn excess (or abnormal) returns on their investments. If the markets are efficient, they will react rapidly as new relevant information becomes available. Finacial theorists have identify three levels of information efficiency that reflect what information is incorporated in stock prices. Identify the form of capitol market efficiency under the efficient market hypothesis based on this statement. Current market prices reflect all revenant information. whether is know publicly or privately.

Initial Public Offering (IPO)

when a company issues stock or shares to the public for the first time, is referred to as.

oversubscribed

when the demand for an initial public offering (IPO) of securities exceeds the number of securities issued, the offering is deemed to be:

undersubscribed

when the demand for an initial public offering (IPO) of securities is less than the number of securities issue the offering is deemed to be.