Discovered and announced immediately

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Kazine is a major drug company. It currently has 100 million shares outstanding with each share having a price of $40. It is developing new drugs. Calculate the share price [and explain your rationale] just after each of the following events assuming financial markets are semi-strong efficient and that all external factors relevant for the pricing of the stock such as interest rates and so forth remain constant.

At date 2, Kazine's makes a public announcement that the drug has been discovered and that its NPV is expected to be $500 million.

At date 3, Kazine's issues $100 million of stock at the price prevailing just after the announcement in (b) to allow them to build a plant to produce the new drug.

At date 4, another drug with an NPV of $150 million is discovered and announced immediately

Reference no: EM13686174

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