Fundamentals of Financial Manageme...
Fundamentals of Financial Manageme...
Suppose three honest individuals gave you their estimates of Stock X’s intrinsic value. One person is your current roommate, the second person is a professional security analyst with an excellent reputation on Wall Street, and the third person is Company X’s CFO. If the three estimates differed, in which one would you have the most confidence? Why?
To determine: The estimate which can be confidently taken among the three estimates and the reason of choosing the estimate.
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 data provided by the company.
Intrinsic value is a subjective matter and it is difficult to estimate. In the given question, it can be said that the proper estimation can be done by the third person who is company ...
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