Question

The legal system accepts that we can assess damages for fraud by the price impact on stocks once the fraud is detected is evidence supportive of the weak-strong form of the efficient market.

TRUE or FALSE

A firm faces two alternatives. The first is to proceed with an investment today. The second is to conduct additional R&D that will take one year and cost $100,000. Since the costs are related to R&D, the firm can exclude them from their cash flow analysis in determining whether to proceed today or postpone the project for one year.

TRUE or FALSE

Answer 1

Ans 1) True.

We can assess damage in case of fraud in share price of the stock, investors may be able to use in recovering funds, including Receiverships, Fair Funds and Disgorgement Funds, Brokerage Account Customer Protections, Corporate Bankruptcy Proceedings, and Private Class Action Lawsuits. Please note that, in many cases, victims of fraud may recover only a fraction of what was stolen, or, in some cases, may recover nothing at all.

Ans 2) True

R&D investment is an investment in the long-term cash flow generation of the company, and as such should be capitalized, not expensed. The capitalized R&D would be amortized over the same set of years, effectively smoothing the R&D expense into adjusted earnings