Originally posted by Imran Siddiqui
How do you know you'd get more money when you sell your stock if the corporation didn't give to DeLay? Stock prices rise and fall based on supply and demand, which looks to the amount of profits and not at how those profits are used.
How do you know you'd get more money when you sell your stock if the corporation didn't give to DeLay? Stock prices rise and fall based on supply and demand, which looks to the amount of profits and not at how those profits are used.
Stock prices are based on the NPV of the expected stream of future cash flows. If retained earnings are invested in negative NPV projects, instead of positive NPV projects, that will impact stock valuation. That is why, BTW, when management invests in enough to neg NPV projects to depress the stock price, there is often a takeover attempt.
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