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Roybus, Inc., a manufacturer of flash memory, just reported that its main production tacilay in Talwan was destroyed in a fire. While the plant was
Roybus, Inc., a manufacturer of flash memory, just reported that its main production tacilay in Talwan was destroyed in a fire. While the plant was fully insured, the koss of production will decrease Roybus's free cash flow by $180 milion at the end of this year and by $60 milion at the end of neot year: a. If Roybus has 35 million shares outstanding and a weighted average cost of captal of 13.0%, 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. a. If Roybus has 35 million shares outstanding and a weighted average cost of capital of 13.0%, 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.) The change in price per share would be 5 (Round to the nearest cent.)
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