After much anticipation a company releases a new smartphone.The smartphone doesn't work as well as expected and lacks many of the features buyers had been expecting.The unexpectedly negative reaction to the smartphone would
A)raise the present value and the price of the corporation's stock.
B)raise the present value and reduce the price of the corporation's stock.
C)reduce the present value and the price of the corporation's stock.
D)reduce the present value and raise the price of the corporation's stock.

Question

Quizplus · Accepted Answer

The negative reaction to the smartphone would reduce the company's perceived future cash flows, thus decreasing the present value of the company. The reduced present value would, in turn, lead to a decrease in the company's stock price.

After Much Anticipation a Company Releases a New Smartphone