Carbondale Oil Announces That a Wildcat Well That It Has

question 74

Multiple Choice

Carbondale Oil announces that a wildcat well that it has sunk in a new oil province has shown the existence of substantial oil reserves.The exploitation of these reserves is expected to increase Carbondale's free cash flow by $100 million per year for eight years.If investors had not been expecting this news,what is the most likely effect on Carbondale's stock price upon the announcement,given that Carbondale has 80 million shares outstanding,no debt,and an equity cost of capital of 10%?

• A)no effect
• B)rise by $5.78
• C)rise by $6.67
• D)rise by $8.30
• E)rise by $10.17

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Definitions:

Marxism

A socio-economic theory that proposes societies progress through class struggle between the bourgeoisie, who own the means of production, and the proletariat, who are the workers.

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A term referring to the idea that social and cultural categories, identities, and issues are shaped by political forces and ideologies rather than being natural or inherent.

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A type of unhealthy fat that is created by hydrogenating vegetable oil, found in various processed foods, and associated with increased risk of heart disease.

Foucault

Michel Foucault was a French philosopher and social theorist known for examining the ways in which society exercises power and control over individuals.