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What is a stock's intrinsic value? It's average market price
What is a stock's intrinsic value? It's average market price. The sum of its capital gains yield and dividend yield The sum of the present value of its dividends O It's current market price. Submit Part 2 | Attempt 1/3 for 10 pts. When is the market for a stock in equilibrium? O When the stock price equals the intrinsic value. When the stock price stays constant. When demand equals supply. O When there's the same number of buyers and sellers.
Expert Solution
1) According to dividend discount model the market value of stock is nothing but the present value of all the dividends discounted using the required rate of return.
Any investment should be valued at the present value of all the cash flows it is going to generate in future .
2) Equilibrium stock price is the price at which intrinsic value is equal to market price. However this does not happen because stock price is always influenced by other factors.
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