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

Question

Quizplus · Accepted Answer

The announcement of an increase in extractable yield due to new technology is positive news, indicating that the company can potentially generate more revenue and profit from its mining operations. This would likely lead to an increase in the stock price (A), as investors anticipate higher future cash flows (C) and revise their estimates of the firm's net present value (NPV) upwards (D). Therefore, it is least likely that investors would think their prior estimates of the firm's value were too high (B); instead, they might believe their prior estimates were too low, given the new information.

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