(a) (b) What is the relationship between a firm's profits and its stock price? If the decrease in Burberry's profits had not been a surprise, would the effect of the announcement on its stock price have been different? Briefly explain.
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Stock markets and stock prices react to financial news related to the company.
A company announces its financial results in each quarter and the stock market reacts to these results by comparing the announced results with their expected figures.
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- A company has just announced a 3-for-1 stock split,effective immediately. Prior to the split, the companyhad a market value of $5 billion with 100 millionshares outstanding. Assuming the split conveys no newinformation about the company, what are the value ofthe company, the number of shares outstanding, andthe price per share after the split? If the actual marketprice immediately following the split is $17.00 pershare, what does this tell us about market efficiency?There is evidence that stock prices of Brexiax Co. fell when the firm announced of 12% profit increase in the fourth quarter (Q4). Does this evidence contradict the efficient market hypothesis? Discuss. Can i get help for this question please?Yesterday at the market close, the stock of Kevin Spellman, Inc. was trading at $100 per share and there were 500,000 shares outstanding. This morning before the market opened, Kevin Spellman, Inc. announced that it was doing a 5:1 stock split. Under the efficient market hypothesis and with no new information, what will be the new stock price in dollars per share?
- The price of the stock of Clarkson Corporation went from P50 to P56 last year. In the following year, the dividend was raised to P2.25. However, a bear market developed toward the end of the year, and the stock price declined from P56.00 at the beginning of the year to P48.00 at the end of the year. What is the rate of return (loss) to stockholders?Big Oil, Inc. has a preferred stock outstanding that pays a $7 annual dividend. If investors’ required rate of return in 10 percent, what is the market value of shares? If the required return declines 6 percent, what is the change in the price of stock? please dont answer in excel, i dont understand it yetFor the following scenario, discuss whether profit opportunities exist from trading in the stock of the firm under the conditions that the market is semistrong form but not strong form efficient. a. The stock price has risen steadily each day for the past 30 days.b. The financial statements for a company were released three days ago, and you believe you’ve uncovered some anomalies in the company’s inventory and cost control reporting techniques that are causing the firm’s true liquidity strength to be understated.c. You observe that the senior management of a company has been buying a lot of the company’s stock on the open market over the past week. Use the following information for the next two questions: Technical analysis is a controversial investment practice. Technical analysis covers a wide array of techniques, which are all used in an attempt to predict the direction of a particular stock or the market. Technical analysts look at two major types of information: historical stock…
- Your company's dividend has remained at $2.80 for several years. The board shows no signs of wanting to change it. If shareholders have a required return of, say, 12.5%, what is an estimate of the value of your stock? Your company's dividend has remained at $2.80 for several years. The board shows no signs of wanting to change it. If shareholders have a required return of, say, 12.5%, what is an estimate of the value of your stock? about $35.00 about $44.64 about $22.40Good News, Inc., just announced an increase in its annual earnings, yet its stock price fell. Is there a rational explanation for this phenomenon?(please dont answer in excel, i dont understand that yet, please only equations or word problems) Big Oil, Inc. has a preferred stock outstanding that pays a $7 annual dividend. If investors’ required rate of return in 10 percent, what is the market value of shares? If the required return declines 6 percent, what is the change in the price of stock?
- Each of the following situations describes an event that affected the stock market price of a par-ticular company. a. The price of a common share of McDonnell Douglas, Inc. , increased by over $5 per share in the several days after it was announced that Saudia Airlines would order $6 billion of com-mercial airliners from Boeing and McDonnell Douglas . b. Citicorp ’s common stock price fell by over $3.50 per share shortly after the Federal ReserveBoard increased the discount rate by 1⁄4 percent. The discount rate is the rate charged to banksfor short-term loans they need to meet their reserve requirements.c. The price of a common share of Ventitex, Inc., a manufacturer of medical devices, fell over $10 (27.7 percent) after it was announced that representatives of the Federal Drug Administra-tion paid a visit to the company. InstructionsFor each of the independent situations described, explain the likely underlying rationale for thechange in market price of the stock.Nynet, Inc., paid a dividend of $3.92 last year. The company's management does not expect to increase its dividend in the foreseeable future. If the required rate of return is 14.5 percent, what is the current value of the stock? (Round answer to 2 decimal places, e.g. 15.25.) Current value $Horse and Buggy Inc. is in a declining industry. Sales, earnings, and dividends are all shrinking at a rate of 5% per year. a. If r = 10% and DIV1 = $6, what is the value of a share? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. If r = 10% and DIV1 = $6, What price do you forecast for the stock next year? (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. If r = 10% and DIV1 = $6, What rate of return should you expect if you buy the stock today and sell it in one year? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.).
