The earnings announcement report released by the Australian firm Candler, Inc. on June 9, 2017 stated that a $790 million gain on sale of one of its business segments increased its second quarter (ended April 30, 2017) net income to $737 million ($5.36 per share), compared to a net income of $15 million ($0.11 per share) for the same quarter the year before. The stock price of Candler fell $0.57 to $21.30 on the date of the news release. On the same day, the ASX composite index fell 218.60 points to 13,723.50. Also on the same day, a financial analyst working for a brokerage firm noted that ASX's revenues in the second quarter increased 2% from the year earlier.

Required: A. Calculate the abnormal return for Candler for June 9, 2017. Assume that = 0 and = 1 for Candler. Show calculations.

Note: The market model formula is Rjt = j +j Rmt + jt

B. Explain whether the sign (indicate positive or negative) of the abnormal return obtained in part (A) is consistent with the notion of market efficiency.

C. Stock price reactions to earnings announcements depend on, among other things, the growth opportunities facing a company. Discuss whether an increase in net income or an increase in sales revenues in the second quarter as compared to the previous year, is a better measure of Candler's growth prospects.