Which of he following best describes our use of HPR in our stock valuation? A. HPR...

Which of he following best describes our use of HPR in our stock valuation?

A. HPR is the fair return on the stock

B. HPR is our best guess of the market's required return on the stock given its current price.

C. HPR is the guaranteed return on the stock.

D. HPR is the historical return on the stock

A stock's one year target price estimate comes from:

		It is the average of the analyst estimates
		The CEO of the company
		The average of all market participants.
		Elon Musk

Solutions

Expert Solution

Answe A is correct.

HPR is the fair return on the stock, as it is basically a return earned by the investor. HPR is the return earned by investor over the period in which it is held.

Analyst keep giving their one year target on the basis of their prediction on company's stock price. In stock market, analyst play important role as they research company thoroughly, attend concall, meet management and then comes with their target price. Different analyst may have different targets because of different thoughtprocess, using different parameters. Hence, stock's one year target price estimates comes from the average of analyst estimates.

jeff jeffy answered 2 years ago

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