The Highlight Company Has a Book Value of $56

question 36

Multiple Choice

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 share valuation model to calculate a present (intrinsic) value of $55.00 per share. Assuming that your calculations are correct you should

• A) buy the share, because the book value and the current trading price are very close to one another in value.
• B) not buy the share, because the present value is less than the market price per share.
• C) buy the share, because the current market price per share is higher than the present value.
• D) buy the share, because the book value per share is greater than the present value.

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Definitions:

Cognitive Ability

Refers to the capacity of the brain to process information, reason, remember, and relate objects and symbols to engage in abstract thinking and problem-solving.

Homo Naledi

A species of human ancestor discovered in South Africa, noted for its unique mix of primitive and modern traits.

Primitive Hominin Traits

Basic or ancestral characteristics exhibited by early human ancestors.

Evolved

Refers to the cumulative changes in heritable traits of a population over successive generations, leading to biodiversity.