On a Particular Day,a Mining Company Reveals That,due to New

question 28

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 due to the pressure to buy
• 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:

Futures Position

An investment strategy involving contracts for the purchase or sale of assets at a future date at a price specified today.

Closed Out

The process of finalizing all positions in a security or contract, effectively ending all obligations or engagements in those positions.

Hedge

An investment position intended to offset potential losses or gains that may be incurred by a companion investment, a common risk management strategy.

Speculator

An investor who engages in the buying and selling of financial instruments with the aim of profiting from short-term market fluctuations.