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:

Invested

Assets or capital put into an endeavor or investment with the expectation of generating a profit.

Days

Units of time measuring 24 hours, constituting the most basic building block of calendars.

Missing Value

Data that is absent from a dataset, which can occur for various reasons and potentially impact analyses.

Calculate

To ascertain by computation; determine by mathematical means.