What can be said of the stock price’s condition?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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An analyst is trying to estimate the intrinsic value of the stock of ATR Kim Eng. The analyst estimates that ATR Kim Eng’s free cash flow during the next year will be P25 million. The analyst also estimates that the company’s free cash flow will increase at a constant rate of 7% a year and that the company’s WACC is 10%. ATR Kim Eng has P200 million of long-term debt and preferred stock and 30 million outstanding shares of common stock. In the Philippine Stock Exchange, ATR Kim Eng’s common stock is traded at P30.00. What can be said of the stock price’s condition? 

Group of answer choices 

oversold 

undervalued/underpriced 

overvalued/overpriced 

in equilibrium 

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