Based on the Information Provided, Calculate the Intrinsic Value in 2009

question 62

Multiple Choice

Based on the information provided, calculate the intrinsic value in 2009 of a share of INV Corp. using the Present Value of Earnings Model (infinite holding period) . For 2009 Net Income was $250,000, total debt was $50,000, and there were 206,263 shares outstanding. The required rate of return is 12% and the estimated growth rate in earnings is 5.5%.

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

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Definitions:

Limited Liability

A legal structure that limits the financial responsibility of the owners or shareholders of a company to the amount they have invested in the company.

Partnerships

A lawful business arrangement involving two or more people who divide both the management responsibilities and the earnings.

Residual Income Claimants

Individuals or entities entitled to the income that remains after all other expenses and obligations have been met, typically referring to owners or shareholders.

Operational Efficiency

The ability of an organization to minimize inputs and costs while maximizing outputs and services.