Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Roybus, Inc, a manufacturer of flash memory, just reported that its main production facility in Taiwan was destroyed in a fire. Although the plan was

Roybus, Inc, a manufacturer of flash memory, just reported that its main production facility in Taiwan was destroyed in a fire. Although the plan was fully insured, the loss of production will decrease Roybus's free cash flow by $181 million at the end of this year and by $60 million at the end of next year.

If Roybus has 40 million shares outstanding and a weighted average cost of capital of 13.6%, what change in Roybus's stock price would you expect upon this announcement? (Assume that the value of Roybus's debt is not affected by the event.)

The change in price per share would be $__(round to the nearest cent)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Personal Finance

Authors: Jack Kapoor, Les Dlabay, Robert J. Hughes, Arshad Ahmad, Jordan Fortino

6th Canadian edition

1259453146, 978-1259453144

More Books

Students also viewed these Finance questions

Question

There is hardly any good that does not have substitutes. Discuss.

Answered: 1 week ago

Question

Explain the concept of shear force and bending moment in beams.

Answered: 1 week ago