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Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

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Section
BuyFindarrow_forward

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

When is a stock said to be in equilibrium? Why might a stock at any point in time not be in equilibrium?

Summary Introduction

To identify: The time when stock is said to be in equilibrium and the reason for the stock not in equilibrium.

Introduction:

Intrinsic Value: An estimated value of the stock which can be determined by considering the exact risk and return. It can be estimated but cannot be measured precisely. The intrinsic value can be calculated by professional analyst on the basis of the data provided by the company.

Explanation

Suppose the intrinsic value of the shares is $40 and the stock price in the market is $25 the stock price will be undervalued by $15. If the person knows about the fact, then he or she ...

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