In a surprise announcement, NASA released details of a major contract with Lockheed-Martin (LMT) that would...

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In a surprise announcement, NASA released details of a majorcontract with Lockheed-Martin (LMT) that would increase LMT'smarket value by $7.5 billion. It was widely expected by the marketthat this contract would be awarded to LMT's major competitorBoeing (BA). Assume that Boeing has 800 million shares outstandingand Lockheed Martin has 425 million shares outstanding. Prior tothis announcement, the market felt that the probability of Boeingwinning the contract was 90% and that Lockheed-Martin's chance wasonly about 10%. What do you anticipate will happen toLockheed-Martin and Boeing's stock prices are a result of thissurprise announcement? Show calculations.

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Answer As given in the question Lockheed MartinLMTs market value will increase by 75 billion or 7500 millions Prior to the announcement the probability of Boeing winning the announcement was 90 while that of LMT was 10 So after the announcement Since most of the people had expected Boeing to win the See Answer

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