Suppose this moming SPB Ltd., a solar panel and battery manufacturing company, paid a dividend of \$3 per share. At 10 a.m. SPB announced its latest earnings results (which were unexpectedly good) and management seems very happy, One year ago, SPB paid for and implemented the Stealth Disposal (SD) project for handling its toxic waste. Only SPB's management is aware of the SD project. The project has reduced SPB's expenses related to toxic waste disposal, but there is a 25% chance of toxic contamination of the drinking water for the nearest city. SPB management has no intention of publicly disclosing that the SD project exists. Following this morning's 10 a.m. quarterly earnings announcement, SPB's earnings growth prospects look very good based upon substantial cost savings (although investors don't know it, these cost saving are due to the SD project). SPB's earnings announcement has caused investors to reassess SPB's dividend growth with a. Refer to the attached figure and assume the management is aware of the SD project. The project has reduced SPB's expenses related to toxic waste disposal, but there is a 25% chance of toxic contamination of the drinking water for the nearest city. SPB management has no intention of publicly disclosing that the SD project exists. Following this morning's 10 a.m. quarterly earnings announcement, SPB's earnings growth prospects look very good based upon substantial cost savings (although investors don't know it, these cost saving are due to the SD project). SPB's earnings announcement has caused investors to reassess SPB's dividend growth with the new expectation that dividends will grow by 0.4% each quarter. Prior to the announcement, dividends were expected to grow by 0.2% each quarter. In addition, given investors' perceived risk of SPB, the equity cost of capital for SPB is 13% (effective annual rate). Complete parts a through f below. a. Refer to the attached figure and assume the market is semistrono-form efficient. What was a. Refer to the attached figure and assume the market is semistrong-form efficient. What was the price of SPB's stock at 9:30 a.m.? The price of SPB's stock at 9:30 a.m. was \$ (Round the final answer to the nearest cent. Round all intermediate values to six decimal places as needed.) Market Efficiency The type of market efficiency we describe nere, where all pubilciy available information is incorporated very quickly into stock prices, is often called semistrong-form market efficiency. The term "semistrong" indicates that it is not as comnlete as strono-form market efficiencv The type of market efficiency we describe here, where all publicly available information is incorporated very quickly into stock prices, is often called semistrong-form market efficiency. The term "semistrong" indicates that it is not as complete as strong-form market efficiency, where prices immediately incorporate all information, including private information known, for example, only to managers. Finally, the term "weak-form market efficiency" means that only the history of past prices is already reflected in the stock price. It helps to think of the different forms of market efficiency as meaning that prices incorporate a steadily increasing set of information and that each of these forms encompasses all the lower forms. For example, since the history of past prices is public information, semistrong-form efficiency encompasses weak-form. The diagram illustrates the idea. In the diagram, the information sets of weak-form, semistrong-form, and strong-form efficiency are represented by the blue, green, and yellow circles, respectively
