Case4: BATTLE FOR VALUE, 2004: FEDEX CORP VS. UNITED PARCEL SERVICE, INC.
Answer of Question1:
The stock price of both (pronominal) companies rose. Because the circularize transportation harmony surrounded by United States and mainland chinaware and the market place opportunities of this deal in china for FedEx and UPS. FedEx stock prices outpaced UPS because FedEx had a large presence in china by having 11 flights e rattling week and serving 220 cities in china with direct flights to in-chief (postnominal) cities such as Beijin and Shanghai.
FedEx increment in market lever is because in efficient market, all investors have access to tuition and in this racing slip they believe that FedEx, due to its original market share and trading operations in mainland China and being groundbreaking and entrepreneurial company, it has a better chance of benefitting from this intellect.
Under conditions of weak efficiency, a market is efficient if it factors past prices and trading volume into the stock price and neither of these factors would explain the 14% increase in FedEx’s market value of equity.
Under semi-strong market efficiency, in addition to prices and trading volume, the market is efficient if it factors analysts’ recommendations and financial statement analysis into the stock price. No historical analysis of the financial statements of FedEx is going to explain the 14% increase in FedEx’s market value of equity.
Strong market efficiency assumes that all publicly known information as well as insider information is factored into the stock price. In this case, news of the initiation of talks on liberalization of air cargo routes between the U.S. and China will have been analyzed to identify the likely impacts on the future cash flows from both FedEx and UPS. The 14% increase should reflect the market’s assessment of the present value of the incremental cash flows to FedEx that are likely to be derived from the liberalization of air cargo routes between the U.S....