Year: 2025
Type: article
Abstract: This study examined how changes in the Net Present Value (NPV) of a company's projects impact fluctuations in its fair stock value. An experiment utilized a simulated stock market with a virtual company (Ahoo Co.) and a group of 20 finance experts (Evaluators) who predicted Ahoo's stock prices to serve as a fair value benchmark. Robust regression analysis revealed a statistically significant positive relationship between changes in Ahoo's project NPVs and changes in the Evaluators' predicted stock values. The NPV coefficient was highly significant, and NPV explained 60% of the variance in predicted stock values. These findings support the hypothesis that a company's fair stock value fluctuations can be significantly explained by fluctuations in the expected NPV from its projects. The study concludes NPV is a crucial determinant of stock valuation, with implications for investment strategies, corporate decision-making, valuation modeling, and market efficiency. Key limitations include the small Evaluator sample size and generalizability issues. Further research with larger samples is recommended to strengthen reliability.
Source: Journal of Finance and Economics
DOI: 10.12691/jfe-13-2-3
Authors: Mohamad Saad, Saeed Bajalan, Reza Tehrani
Institutions: Lebanese International University, University of Tehran
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W4411128524