On a particular day, a mining company reveals that, due to new extraction technology, the extractable yield from several of its mines has risen by 15%. Which of the following is the LEAST likely consequence of such an announcement?
A)Investors would increase their forecast of future cash flows in that firm.
B)The share price would rise due to the pressure to buy.
C)Investors would revise their estimates of the net present value (NPV)of the firm.
D)Investors would determine that the estimates of the firm's value on the date prior to the announcement were too high.

Question

Quizplus · Accepted Answer

The announcement of a higher extractable yield from the mines would lead investors to revise their estimates of the firm's future cash flows and NPV. This would likely lead to a higher share price due to increased demand. However, it is unlikely that investors would determine that their estimates of the firm's value prior to the announcement were too high, as this announcement would essentially be new information that was not previously available. Therefore, choice D is the least likely consequence of the announcement.

On a Particular Day, a Mining Company Reveals That, Due