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Equity Valuation - Equity Valuation 18.1 Valuation by...

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Equity Valuation 18.1 Valuation by Comparables Law of One Price : If 2 assets are equivalent in all economically relevant respects, they they should have the same market price. Arbitrage : simultaneously buying an underpriced asset and selling its overpriced equivalent to achieve a positive profit with no net outlay of cash. Valuation Models: Estimation of the “fundamental” value of a corporation’s stock from observable market data and from the financial statements of the firms and its competitors SEC: requires all federal companies with less than $10 million in assets and 500 shareholders to file registration statements, periodic reports, and other forms electronically through EDGAR: www/sec/gov/edgar.shml Balance Sheet Valuation Concepts Book Value : net worth of a company as it is reported on its balance sheet Vs. Market Value: BV of a firm is the result of applying a set of arbitrary accounting rules to spread the acquisition cost of assets over a specified number of years, whereas the market prices of a stock takes account of the firm’s value as a going concern.
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