CONNECT 1 SEMESTER ACCESS CARD FOR CORPORATE FINANCE
11th Edition
ISBN: 9781259298738
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor
Publisher: McGraw-Hill Education
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Chapter 14, Problem 19CQ
Summary Introduction
To discuss: The
Introduction:
Market Efficiency refers to the market strategy where the stock price reflects to the current available information. The stock price goes up and down according to the relevant available information.
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CK Hitman Limited has changed how it accounts for inventory from FIFO to weighted average. Although the resulting earnings report released is 23 percent higher than before the change in accounting policy, no effect on tax payable. There is no other surprise in the earnings report, and the change in the policy was publicly announced. Assume that the market is efficient.
Required:
Evaluate how the movement of stock price when the market learns that the reported earnings are higher.
What if the change in policy can make the firm pay less tax in future.
Bob's Inc has the following balance sheet and income statement data
see image...
The new CFO thinks that inventory are excessive and could be lowered to cause the current ratio to equal industry average 3.00 w/o affecting either sales or net income. assuming that inventories are sold off and not replaced to get the current ratio to the target level and that the funds generated are used to buy back common stock at book value, by how much would the ROE change?
Wilma Company experienced a P500,000 decline in the market value of inventory at the end of the first quarter. The entity had expected this decline to reverse in the second quarter, and in fact, the second quarter recovery exceeded the previous decline by P100,000.
What amount of gain or loss should be reported in the interim statements for the first and second quarters?
----------------
Choices:
First quarter Second quarter
a. 500,000 loss. 500,000 gain
b. 500,000 loss 600,000 gain
c. 500,000 loss 100,000 gain
d. 0 0
Chapter 14 Solutions
CONNECT 1 SEMESTER ACCESS CARD FOR CORPORATE FINANCE
Ch. 14 - Prob. 1CQCh. 14 - Prob. 2CQCh. 14 - Efficient Market Hypothesis Which of the following...Ch. 14 - Market Efficiency Implications Explain why a...Ch. 14 - Efficient Market Hypothesis A stock market analyst...Ch. 14 - Semistrong Efficiency If a market is semistrong...Ch. 14 - Efficient Market Hypothesis What are the...Ch. 14 - Prob. 8CQCh. 14 - Prob. 9CQCh. 14 - Efficient Market Hypothesis For each of the...
Ch. 14 - Technical Analysis What would a technical analyst...Ch. 14 - Prob. 12CQCh. 14 - Prob. 13CQCh. 14 - Efficient Markets A hundred years ago or so,...Ch. 14 - Efficient Market Hypothesis Aerotech, an aerospace...Ch. 14 - Prob. 16CQCh. 14 - Prob. 17CQCh. 14 - Efficient Market Hypothesis Newtech Corp. is going...Ch. 14 - Prob. 19CQCh. 14 - Efficient Market Hypothesis The Durkin Investing...Ch. 14 - Efficient Market Hypothesis Your broker commented...Ch. 14 - Efficient Market Hypothesis A famous economist...Ch. 14 - Efficient Market Hypothesis Suppose the market is...Ch. 14 - Prob. 24CQCh. 14 - Prob. 25CQCh. 14 - Efficient Market Hypothesis Assume that markets...Ch. 14 - Prob. 27CQCh. 14 - Evidence on Market Efficiency Some people argue...Ch. 14 - Prob. 1QPCh. 14 - Cumulative Abnormal Returns The following diagram...Ch. 14 - Cumulative Abnormal Returns The following figures...Ch. 14 - Prob. 4QPCh. 14 - Prob. 1MCCh. 14 - Prob. 2MCCh. 14 - Prob. 3MC
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