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ADMS 4510 - Ass.2 F2012.pdf

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Administrative Studies
ADMS 3330
Douglas Kong

Chapter 5 Exercise 4AHigh Persistence net income results from the permanent changes expected to persist indefinitely such changes may be due to permanent changes in sales or costs for example improvements due to new technology economies of scale changes in government lawsregulations etc BPersistence of 1 is transitory affecting earnings in the current year but not future years such as gains and losses on capital assets CPersistence of 0 priceirrelevant may result from the choice of accounting policy such as whether organization capitalizes costs or expenses them such as maintenance or leaseimprovement costs Exercise 17AMarket ModelRaBRe where aBR is the beginningofperiod expected return and e is abnormal return Thus eRaBRERaBRR1BBR000021065065000600000700039000397Rchange in share priceopening share price1253735125 003238E003238000397003635B Yes According to efficient securities market the prices of securities traded on the market fullyreflect all of the publically available information about those securities and as stated in 374 million of reported profit was in line with analysts expectations and as such there would not be any rise of share price due to this news However 6
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