Question 8 (Total 10 marks) CBC Corporation is a listed construction company in Australia and it is classified as a large cap company by ASX. On 31st December 2019, it signed a $915 million contract to undertake a large construction project in Melbourne. The new contract is expected to increase the profits of the business by a substantial amount over the next 5 years. The news of the contract was announced publicly on 2nd January 2020. Assuming 31st December 2019 and 2nd January 2020 are stock market trading days.

Required:

a. How would the share price of CBC Corporation adjust to the formal announcement on 2nd January 2020 assuming the Australian stock market is in the form of semi-strong efficiency? Explain why.

(5 marks) b. How would the share price of CBC Corporation adjust to the formal announcement on 2nd January 2020 assuming the Australian stock market is in the form of strong efficiency? Explain why.