Intrinsic value serves as a basis for determining

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Unformatted text preview: t investors who pick stocks by using fundamental analysis look at a company's market value and then determine whether the market value is adequate or is undervalued in comparison to its book value, net assets, or another measure. 17 17 Types of Valuation Intrinsic value, also called fundamental value, is a measure of the theoretical value of an asset. The actual value of a security, as opposed to its market price or book value. The intrinsic value includes other variables such as brand name, trademarks, and copyrights that are often difficult to calculate and sometimes not accurately reflected in the market price. Intrinsic value serves as a basis for determining whether to buy or sell a financial asset when compared to its market value or price. 18 18 Valuation Approaches The first, discounted cash flow valuation analysis­ is a method of estimating the intrinsic value of an asset based upon its capacity to generate cash flows in the future.All future cash flows are estimated and discounted to give their present values (PVs) — the sum of all future cash flows, both incomin...
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This note was uploaded on 02/11/2014 for the course FIN 102 taught by Professor Han during the Fall '11 term at Kazakhstan Institute of Management, Economics and Strategic Research.

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