How much would john be willing to pay

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Question: Assume the information in (a.) above applies. Now, John has been watching lots of T.V.; way too much, actually. He notes that when the Federal Reserve Open Market Committee meets each month, if the Chairman is smiling, the economy does well; if the Chairman is frowning, the economy does poorly. In the past, when X Co. earnings surprise has been positive, the Chairman had smiled 60% of the time. When X Co. earnings surprise has been negative, the Chairman had frowned 70% of the time. Guess what? X Co. is soon to report annual earnings, and Chairman Bernanke just smiled. Is the stock a good buy at $100/share, according to John's model? How much would John be willing to pay?

Reference no: EM133575295

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