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An elderly relative offers to sell you their used 1958 Cadillac Eldorado for $52,000. You note that very similar cars are selling on the open market for $87,000. You donʹt care for classic cars and would rather buy a new Ford Explorer for $35,000. What is the net value of buying the Cadillac?

31) Why is the stock price of a company an indication of the performance of the companyʹs senior managers?

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TomShelby

Answer:

The value for buyin the car will be of 35,000

as we purchase for 52,000 and we are going to sale at 87,000 achieving a 35,000 net value.

The price of the stock will represent the future cash flow of the company. If a person considers the manager anre't performing as they should with their assets the conclusio nis that the stock are undervalued (as there is a negative goodwill from the managers)

This investor will purchase shares of the company (takeover) and then, change management (eliminating the negative goodwill) This will make the stock increase as asset will be exploited at much better yields.

Explanation:

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