On a Particular Day, a Mining Company Reveals That, Due

question 16

Multiple Choice

On a particular day, a mining company reveals that, due to new extraction technology, the extractable yield from several of its nickel/lead mines has risen by 15%. Which of the following is the LEAST likely consequence of such an announcement?

• A) The price of the stock would rise.
• B) Investors would determine that the estimates of the firm's value on the date prior to the announcement were too high.
• C) Investors would increase their forecast of future cash flows in that firm.
• D) Investors would revise their estimates of the net present value (NPV) of the firm.

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Definitions:

Lumber

A term for timber after it has been processed into beams and planks, a stage in the process of wood production.

Option Payoff Profiles

Graphical representations showing the potential profit or loss of an option strategy at various underlying asset prices at expiration.

Buying A Call

Involves purchasing a call option, giving the buyer the right, but not the obligation, to buy a specific asset at a predetermined price within a specified time frame.

Selling A Call

A strategy in options trading where the seller of the call option is obligated to sell the underlying asset at a specified price if the option is exercised.