Based on the Information Provided, Calculate the Intrinsic Value in 2010

question 136

Multiple Choice

Based on the information provided, calculate the intrinsic value in 2010 of a share of INV Corp. using the Present Value of Earnings Model (infinite holding period) . For 2010 net income was $250,000, total debt was $50,000, and there were 206,263 shares outstanding. The required rate of return is 12 percent, and the estimated growth rate in earnings is 5.5 percent.

• A) $19.43
• B) $23.98
• C) $28.52
• D) $22.73
• E) $15.50

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Definitions:

Price Discrimination

The business strategy of selling the same product to different customers at different prices based on their willingness to pay.

Senior Citizens

Individuals of an older age, often defined by legal or social age thresholds, who may be eligible for certain benefits.

Hotel Chains

A series of hotels under the same brand or management, offering standardized accommodations and services across different locations.

Producer Surplus

The difference between what producers are willing to sell a good for and the actual price they receive, representing a measure of producer profitability.