Assume the value of roybus debt is not affected by the event

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Reference no: EM131865883

Roybus, Inc., a manufacturer of flash memory, just reported that its main production facility in Taiwan was destroyed in a fire. While the plant was fully insured, the loss of production will decrease Roybus’ free cash flow by $180 million at the end of this year and by $60 million at the end of next year. If Roybus has 35 million shares outstanding and a weighted average cost of capital of 13%, what change in Roybus’ stock price would you expect upon this announcement? (Assume the value of Roybus’ debt is not affected by the event.)

Reference no: EM131865883

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