For the Week 1 Assignment, you will submit answers to the following questions in your textbook:
Chapter 1
- Question 1-3
- Question 1-4
- Question 1-5
- Question 1-8
- Question 1-11
Questions in textbook below.
1-1 What is a firm’s intrinsic value? Its current stock price? Is the stock’s “true” long-run value more closely related to its intrinsic value or to its current price? 1-2 When is a stock said to be in equilibrium? Why might a stock at any point in time not be in equilibrium? 1-3 Suppose three honest individuals gave you their estimates of Stock X’s intrinsic value. One person is your current roommate, the second person is a professional security analyst with an excellent reputation on Wall Street, and the third person is Company X’s CFO. If the three estimates differed, in which one would you have the most confidence? Why? 1-1 What is a firm’s intrinsic value? Its current stock price? Is the stock’s “true” long-run value more closely related to its intrinsic value or to its current price? 1-2 When is a stock said to be in equilibrium? Why might a stock at any point in time not be in equilibrium? 1-3 Suppose three honest individuals gave you their estimates of Stock X’s intrinsic value. One person is your current roommate, the second person is a professional security analyst with an excellent reputation on Wall Street, and the third person is Company X’s CFO. If the three estimates differed, in which one would you have the most confidence? Why? 1-11 Edmund Enterprises recently made a large investment to upgrade its technology. Although these improvements won’t have much effect on performance in the short run, they are expected to reduce future costs significantly. What effect will this investment have on Edmund Enterprises’ earnings per share this year? What effect might this investment have on the company’s intrinsic value and stock price?
