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When calculating the intrinsic value of a stock, the growth rate must always be lower than...

When calculating the intrinsic value of a stock, the growth rate must always be lower than the required return.

True or False

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Answer #1

The given statement is correct because when the growth rate is greater than the required rate of return, then the value of share, which is intrinsic value in nature, would be in negative.

While calculation of the intrinsic value of the share, we will always be subtracting the growth rate from the required rate of return, so if the differential is in negative, it will mean that the intrinsic value of the share would also be negative so the given statement is TRUE.

This is a TRUE statement

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