Question
The Highlight Company has a book value of $56.50 per share, and is currently trading at a price of $59.00 per share. You are interested
The Highlight Company has a book value of $56.50 per share, and is currently trading at a price of $59.00 per share. You are interested in investing in Highlight, and have just used a present-value based stock valuation model to calculate a present (intrinsic) value of $55.00 per share for Highlight's stock. Assuming that your calculations are correct you should
a-buy the stock, because the book value per share is greater than the present value.
b-buy the stock, because the current market price per share is higher than the present value.
c-buy the stock, because the book value and the current trading price are very close to one another in value.
d-not buy the stock, because the present value is less than the market price per share.
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