Stocks and Their Valuation Graded Assignment Due Friday 12.22.17 at 11:45 PM Att
ID: 2807261 • Letter: S
Question
Stocks and Their Valuation Graded Assignment Due Friday 12.22.17 at 11:45 PM Attempts: Do No Harm: 12 3. Stock prices and intrinsic values Aa Aa Benjamin Graham, the father of value investing, once said, "In the short run, the market is a voting machine, but in the long run, the market is a weighing machine. In this quote, Benjamin Graham was referring to the key difference between the "price" and the "value of a security. In November 2006, Ctigroup's stock (NYSE: C) was trading at $49.59. Following the credit crisis of 2007-2008 and by the end of October 2009, Oitigroup's stock price had plummeted to $4.27. Several banks went under, and others saw their stock prices lose more than 60% of their value. Based on your understanding of stock prices and intrinsic values, which of the following statements is true? O A stock's intrinsic value is based on true investor returns O A stock's intrinsic value is based only on the perceived risk of a stock. You can estimate the value of a company's stock using models such as the corporate valuation model and the dividend discount model. Which of the following companies would you choose to evaluate if you were using the discounted dividend model to estimate the value of the company's stock? O A company that has been distributing a portion of their earnings every quarter for the past six years O A company that is in a high-growth stage and plans to retain all its earnings for the next few years to support its growth gb F3 4 5 9Explanation / Answer
a- Intrinsic value is based on true investor returns.
b - A company that has been distributing a part of its returns. Because dividend discount mdoel is applicable when the dividend is distributed.