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A pharmaceutical company announces that it has received Federal Drug Administration approval for a new allergy drug that completely prevents hay fever. The consensus analyst forecast for the company’s earnings per share (EPS) is $5.00, and insiders agree with analyst expectations. They too expect that, with this new drug, earnings will drive the EPS to $5.00. What will happen when the company releases its next earnings report?

Respuesta :

Answer:

No Change is expected on Stock value.

Explanation:

From the statement, it is evident that the EPS of $ 5 has been arrived at after factoring in the news about the FDA approval of the drug. This mere announcement was enough to raise the value of the company's EPS. For this reason, when the company releases its next earnings report, the price of the company's stock will not be change. This is because the news about FDA's approval of the drug was already absorbed.

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