21) Suppose XYZ Corporation is traded on the New York Stock Exchange. XYZ\'s clo

Question

21) Suppose XYZ Corporation is traded on the New York Stock Exchange. XYZ's closing price on Monday is $20 per share. After the market closes on Monday, XYZ makes a surprise announcement that it has obtained a major new customer. XYZ's stock will likely
A) Open at $20 per share on Tuesday and then increase as more investors read the announcement in The Wall Street Journal.
B) Remain at $20 per share because in efficient markets the price already reflects all information.
C) Open above $20 because the positive news will result in a higher valuation even though the stock has not yet traded.
D) Open below $20 because the surprise announcement creates more uncertainty.
Answer:

22) A corporate manager decides to build a new store on a lot owned by the corporation that could be sold to a local developer for $250,000. Twenty years ago, the lot was purchased for $50,000. When determining the value of the new store project,
A) The cost of the lot is zero since the corporation already owns it.
B) The opportunity cost of the lot is $250,000 and should be included in calculating the value of the project.
C) The cost of the lot for valuation purposes is $50,000 because land does not depreciate.
D) The incremental cash flow should be the $50,000 original cost less accumulated amortization.
Answer:

Explanation / Answer

21) Suppose XYZ Corporation is traded on the New York Stock Exchange. XYZ's closing price on Monday is $20 per share. After the market closes on Monday, XYZ makes a surprise announcement that it has obtained a major new customer. XYZ's stock will likely
A) Open at $20 per share on Tuesday and then increase as more investors read the announcement in The Wall Street Journal.
B) Remain at $20 per share because in efficient markets the price already reflects all information.
C) Open above $20 because the positive news will result in a higher valuation even though the stock has not yet traded.
D) Open below $20 because the surprise announcement creates more uncertainty.
Answer:

22) A corporate manager decides to build a new store on a lot owned by the corporation that could be sold to a local developer for $250,000. Twenty years ago, the lot was purchased for $50,000. When determining the value of the new store project,
A) The cost of the lot is zero since the corporation already owns it.
B) The opportunity cost of the lot is $250,000 and should be included in calculating the value of the project.
C) The cost of the lot for valuation purposes is $50,000 because land does not depreciate.
D) The incremental cash flow should be the $50,000 original cost less accumulated amortization.
Answer:

Related Questions

Navigate

• Browse (All)
• Browse 2
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.