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28 February, 11:55

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?

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  1. 28 February, 12:12
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    A firm's intrinsic value is an estimate of a stock's "true" value based on accurate risk and return information.

    It can be estimated but not measured precisely. A stock's current price is its market price which is the value based on perceived but possibly incorrect information as seen by the marginal investor.

    From these, it can be said that a stock's "true" long-run value is more closely related to its intrinsic value rather than its current price.
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