Chapter 18, Problem 14PS

A

Summary Introduction

To calculate: The estimate of DEQ’s intrinsic value per share is to be determined as per the given information.

Introduction:

When a company has to be valued without the reference of the market value, we make use of the concept of intrinsic value.   Intrinsic value is supposed to be the value of the company derived after a detailed analysis, specifically without considering its market value.  The intrinsic value concept can be applied while valuing the company’s stock, the currency of any of its products.

B

Summary Introduction

To calculate: The effect on the price over the next year is to be determined when current market price is equal to its intrinsic value.

Introduction:

When a company has to be valued without the reference of the market value, we make use of the concept of intrinsic value.   Intrinsic value is supposed to be the value of the company derived after a detailed analysis, specifically without considering its market value.  The intrinsic value concept can be applied while valuing the company’s stock, the currency of any of its products.

C

Summary Introduction

To calculate: The expected situation of price in the following next year (case of b) is to be determined.

Introduction:

When a company has to be valued without the reference of the market value, we make use of the concept of intrinsic value.   Intrinsic value is supposed to be the value of the company derived after a detailed analysis, specifically without considering its market value.  The intrinsic value concept can be applied while valuing the company’s stock, the currency of any of its products.

D

Summary Introduction

To calculate: The estimation of DEQ’s intrinsic value when DEQS to pay out only 20% of earnings stating in year 6.

Introduction:

When a company has to be valued without the reference of the market value, we make use of the concept of intrinsic value.   Intrinsic value is supposed to be the value of the company derived after a detailed analysis, specifically without considering its market value.  The intrinsic value concept can be applied while valuing the company’s stock, the currency of any of its products.