Question

Suppose the broad stock market falls 20% in a year and Home Depot’s stock price falls...

Suppose the broad stock market falls 20% in a year and Home Depot’s stock price falls by 10%.

Price per share Shares (million) BV (million)
114.75 1,307 9,322


a. Will the company’s market value added rise or fall?

  • Rise

  • Fall

b. Should this change affect our assessment of the performance of Home Depot’s managers?

  • Yes

  • No

c. Would you feel differently about Home Depot’s managers if the stock market were unchanged and Home Depot’s stock fell by 10%?

  • Yes

  • No

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Answer #1

a.

fall as market price has fallen

b.

No, because broad equity market has performed even worse

c.

Yes, because overall market is stable

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