Now suppose the market for WarehouseCorp shares returns to the initial demand. y

Question

Now suppose the market for WarehouseCorp shares returns to the initial demand. yield an equilibrium price of $30 per share and 150 million shares. Suppose that a stock market analyst who has researched WarehouseCorp tells you that its total annual profit will be $135 million forever, and that the interest rate in the economy will remain at 4% forever. If you believe this analyst and act accordingly, what will you do? Sell any WarehouseCorp stock that you own because the present value of its future earnings per share is less than the price per share. Buy WarehouseCorp stock because the present value of its future earnings per share is greater than the price per share. Buy WarehouseCorp stock because it will keep earning profit forever. Sell any WarehouseCorp stock that you own because the present value of Its future earnings per share is more than the price per share.

Explanation / Answer

D option

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