ch13 - Investment Analysis Chapter 13 Equity Valuation I...

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Investment Analysis Chapter 13 Equity Valuation I. Valuation by comparisons a. Fundamental analysts: those analysts who use information concerning the current and prospective profitability of a company to assess its fair market value b. Book value: net worth of a company as reported on its balance sheet c. Limitations of book value i. Ignores growth, relies on historical data ii. Liquidation value: net amount that can be realized by selling the assets of a firm and paying off the debt; something hidden that has value that people aren’t paying attention to 1. Liquidation value could be seen as a floor for the stock’s price, if it drops below liquidation value per share it becomes a take- over target iii. Replacement cost: cost to replace a firm’s assets II. Intrinsic value vs. market price a. Intrinsic value: the present value of a firm’s expected net cash flows discounted by the required rate of return b. Whenever the intrinsic value exceeds the market price, the stock is
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This note was uploaded on 05/10/2010 for the course FIN 3504 taught by Professor Staff during the Fall '08 term at University of Central Florida.

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ch13 - Investment Analysis Chapter 13 Equity Valuation I...

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