If the price of a stock equals the present value of expected future dividend payments, then the price of the firm's stock would be expected to decrease when:

Question

Quizplus · Accepted Answer

All of the above factors can lead to a decrease in the expected future dividends, thus reducing the present value and price of the stock. Increased competition can reduce profits, higher taxes can reduce net income, and lower predicted profits directly reduce expected dividends.

If the Price of a Stock Equals the Present Value