Roybus, Inc., a manufacturer of flash memory, just reported that its main production facility in Taiwan was destroyed in a fire. While the plant was fully insured, the loss of production will decrease Roybus's free cash flow by $$185$ million

at the end of this year and by $$64$ million at the end of next year.

a$.$ If Roybus has $40$ million shares outstanding and a weighted average cost of capital of $12\mathrm{.}4\%,$ what change in Roybus's stock price would you expect upon this announcement? $($Assume that the value of Roybus' debt is not affected by

the event.$)$

b$.$ Would you expect to be able to sell Roybus's stock on hearing this announcement and make a profit? Explain.