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

question 10

Multiple Choice

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

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

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Definitions:

Cash Dividend

A payment made by a company out of its earnings to its shareholders in cash.

Financing Activities

Transactions that involve raising funds to finance the company's operations and repaying debt; part of a firm's financial operations detailed on the statement of cash flows.

Principal Repayment

The portion of a loan payment that goes toward reducing the original amount borrowed, not including interest.

Financing Activities

Transactions that result in changes in the size and composition of the equity capital or borrowings of a company.