Say whether each of the following events would likely cause the price of Google
ID: 1213923 • Letter: S
Question
Say whether each of the following events would likely cause the price of Google stock to go up, go down, or not change:
a. A competitor launches a search engine that’s better than Google’s.
b. The corporate income tax rate is significantly reduced.
c. Google’s board of directors becomes dominated by close friends and relatives of its top management.
d. The price of wireless Internet connections unexpectedly drops, so more and more people use the Internet.
e. Google announces a profit of $10 billion, matching analysts’ expectations.
Explanation / Answer
a. A competitor launches a search engine that’s better than Google’s. Stock will go down
b. Areduction in corporate tax rates could mean a major stimulus to corporate investments and future profitability. Its effect on stock market performance will be unambiguous and positive.
c. No change. It wouldn't be good for Google, but investors don't care who's on the board so long as the company's profits continue.
d. If more people ended up using Google (and not just the generic Internet), that would be good for Google's profits and, therefore, its stock go up.
e. None. Investors will say that Google had "met market expectations." The anticipated $10 billion profit already had been factored into Google's current stock price.