- 9 Marks
FM – L2 – Q19 – Financial markets
Effect of NPV announcement on share price in a weak form efficient market.
Question
A company’s board of directors makes a decision on 1st May to invest in a new project that will have an NPV of + GH₵4,000,000. The decision is announced to the stock market on 12th May.
The company has 50 million shares in issue and at close of trading on 30th April these had a market value of GH₵4 each.
Required:
(A). State what would happen to the share price of the company if the stock market has weak form efficiency
(B) State what would happen to the share price of the company if the stock market has semi-strong form efficiency.
(C). State what would happen to the share price of the company if the stock market has strong-form efficiency.
Find Related Questions by Tags, levels, etc.
- Tags: Efficient markets, NPV announcement, share price, Stock market, Strong form efficiency
- Level: Level 2
- Topic: Financial markets
Report an error
