Use the Information for the Question(s)below

question 24

Multiple Choice

Use the information for the question(s) below.
Rockwood Industries has 100 million shares outstanding,a current share price of $25,and no debt.Rockwood's management believes that the shares are underpriced,and that the true value is $30 per share.Rockwood plans to pay $250 million in cash to its shareholders by repurchasing shares.Management expects that very soon new information will come out that will cause investors to revise their opinion of the firm and agree with Rockwood's assessment of the firm's true value.
-Assume that Rockwood is able to repurchase shares prior to the market becoming aware of the new information regarding Rockwood's true value.After the repurchase,and following the release of the new information regarding the true value of Rockwood,the firm's share price is closest to:

• A)$30.00.
• B)$31.50.
• C)$28.75.
• D)$30.60.

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Definitions:

Observational Learning

The method of acquiring behaviors through observing and mimicking others, commonly referred to as social learning or modeling.

Classical Conditioning

A learning process that occurs through associations between an environmental stimulus and a naturally occurring stimulus, famously demonstrated by Pavlov.

Operant Conditioning

A technique in education that involves altering a behavior's intensity through reinforcement or penal actions.

Cognitive Dissonance

The discomfort experienced when holding two or more conflicting beliefs, values, or attitudes, especially when actions contradict beliefs.