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:

Marginal Cost

Marginal cost is the additional cost incurred from producing one extra unit of a good or service, an important concept in economics for determining optimal production levels.

Average Total Cost

The total cost of production (fixed and variable costs combined) divided by the quantity of output, a key factor in pricing and profitability analyses.

Marginal Revenue

The additional income generated from selling one more unit of a product or service.

Profit-Maximizing

A strategy or point where a firm produces at a level where its marginal cost equals marginal revenue, maximizing its profit.