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question 77

Essay

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In a surprise announcement,NASA released details of a major contract with Lockheed-Martin (LMT)that would increase LMT's market value by $7.5 billion.It was widely expected by the market that this contract would be awarded to LMT's major competitor Boeing (BA).Assume that Boeing has 800 million shares outstanding and Lockheed Martin has 425 million shares outstanding.Prior to this announcement,the market felt that the probability of Boeing winning the contract was 90% and that Lockheed-Martin's chance was only about 10%.
-What do you anticipate will happen to Lockheed-Martin and Boeing's stock prices are a result of this surprise announcement?

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Definitions:

Preference Shares

Shares that give holders a priority over common stockholders in terms of receiving dividends and assets in the event of a liquidation, often without voting rights.

Interest Expense

The cost incurred by an entity for borrowed funds, reflected on the income statement as a charge against earnings.

Stock Options

Financial instruments that give the holder the right, but not the obligation, to buy or sell a stock at a predetermined price within a specific time frame.

Owners' Interests

The equity interest held by shareholders in a corporation, reflecting their claim on the company's assets and earnings.