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In: Accounting

give a numerical illustration calculating the fair value of something. (take supposed values)

give a numerical illustration calculating the fair value of something. (take supposed values)

Solutions

Expert Solution

Fair value accounting uses current market values as the basis for recognizing certain assets and liabilities. Fair value is the estimated price at which an asset can be sold or a liability settled in an orderly transaction to a third party under current market conditions

How do you calculate the fair value of a stock?

Also, you can calculate the fair value for a stock is by using the P/E (price to earnings) ratio. What you have to do is to compare P/E ratios among companies from the same industry. For example, if you want to find the fair value for a utility, you have to compare the P/E ratio to other P/E ratios in that industry

Example:

Determine the fair value of 1,000 shares of a public company's stock by using the Internet or a major newspaper to find the last closing share price for the stock. For example, if the stock closed at a price per share of $50 yesterday, then the fair value of 1,000 shares is 1,000 x 50 = $50,000.

ekkarill92 answered 2 years ago
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