a manufacturer of cleaning products, just reported that its main production facility in Hong Kong was destroyed in a fire. While the plant was fully insured, the loss of production will decrease Pantus’ free cash flow by $50 million for the next three years. a) If Pantus has 45 million shares outstanding, weighted average cost of capital of 10% and equity cost of capital of 12%, what change in Pantus’ stock price would you expect upon this announcement? (Assume the value of Pantus’ debt -valued at $75 million- is not affected by the event.)
a manufacturer of cleaning products, just reported that its main production facility in Hong Kong was destroyed in a fire. While the plant was fully insured, the loss of production will decrease Pantus’ free cash flow by $50 million for the next three years. a) If Pantus has 45 million shares outstanding, weighted average cost of capital of 10% and equity cost of capital of 12%, what change in Pantus’ stock price would you expect upon this announcement? (Assume the value of Pantus’ debt -valued at $75 million- is not affected by the event.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Question 3
Pantus, Inc., a manufacturer of cleaning products, just reported that its main production facility in Hong Kong was destroyed in a fire. While the plant was fully insured, the loss of production will decrease Pantus’
a) If Pantus has 45 million shares outstanding, weighted average cost of capital of 10% and equity cost of capital of 12%, what change in Pantus’ stock price would you expect upon this announcement? (Assume the value of Pantus’ debt -valued at $75 million- is not affected by the event.)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education