1-1 What is a firm’s intrinsic value? Its current stock price?
Is the stock’s “true” long-run value more closely related to its
intrinsic value or to its current price? When is a stock said to be
in equilibrium? Why might a stock at any point in time not be in
Firms intrinsic value is the estimate of the true value of the
The current stock price is the price at which the stock is currently trading in the exchange.
Stocks true long value is close to its intrinsic value.. because in the long term it is believed that Stock touches its intrinsic value from time to time (believing that markets are efficient).
Stock is said to be in equilibrium when is the current market price is equal to its intrinsic value.
Stock may not be in equilibrium if the expected rate of return anticipated by the equity investors is not equal to its required rate of return. Which makes intrinsic value not equal to its current market price.
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