A Stock's Price Is Based on the Expected Present Value

question 19

True/False

A stock's price is based on the expected present value, at the market capitalization rate, of all the stock's future earnings.

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Definitions:

Legal Obligation

A duty enforced by law, requiring an individual or entity to conform to certain conduct or to refrain from certain actions.

Gratuitous Promise

A promise made without expecting anything in return, which is generally not enforceable in contract law unless it is made in a deed.

Existing Duty

An obligation that is currently in effect under the law or within the terms of a contract.

Consideration

In contract law, something of value promised to another when making an agreement, which is required for the contract to be enforceable.