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Suppose market participants suddenly learn that a company's expected free cash flow will be $57,000 more than originally anticipated in each of the next 5
Suppose market participants suddenly learn that a company's expected free cash flow will be $57,000 more than originally anticipated in each of the next 5 years. For calculation purposes, you may assume the first of these cash flow changes occurs exactly one year from today. If the company's cost of equity capital is 17%, there are 858,000 shares of stock outstanding, and the company has no debt, how much will the share price increase when the new information is recognized? Assume efficient markets.
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