what does it mean when the instric value of a stock is considered over valued and...

what does it mean when the instric value of a stock is considered over valued and under valued. if a stock were to be either, what determines their value?

Expert Solution

The intrinsic value of a stock is overvalued when the price is higher than the present value of its future payments. Conversely it is undervalued when the market price is lower than its intrinsic value.

The value of a stock is determined by the present value of future dividends asociated with the stock.The company value can be determined by the present value of future cash flows of the company. From this the value of debt is reduced to arrive at the value of equity. Per share price is then derived by dividing Equity by the number of shares.

jeff jeffy answered 2 years ago

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