In an Efficient Market When a fiRm Makes an Announcement

question 1

Multiple Choice

In an efficient market when a firm makes an announcement of a new product or product enhancement with superior technology providing positive NPV, the share price will:

• A)rise gradually over the next few days.
• B)decline gradually over the next few days.
• C)rise on the same day to the new price.
• D)stay at the same price, with no net effect.
• E)drop on the same day to the new price.

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Definitions:

Income Statement

A financial report that shows a company's revenues, expenses, and profits over a specific period, highlighting operational efficiency.

Contributed Capital

The total value of the cash and other assets received by a company from its shareholders in exchange for shares of stock.

Income Statement

A financial statement that shows a company's revenue and expenses over a specific period, highlighting net profit or loss.

Accounting Records

Documents and books that keep track of all financial transactions of a company, forming the basis for financial statements.