The intrinsic value of a company\'s stock, also known as its fundamental value,

Question

The intrinsic value of a company's stock, also known as its fundamental value, refers to the stock's true value based on expected future cash flows and the risks involved. The value perceived by stock market investors determines the market price of a stock. A stock trading at a price below its intrinsic value is considered to be undervalued. A stock trading at a price above its intrinsic value is considered to be overvalued. the market price of the In a state of market equilibrium, the intrinsic value of the stock will be stock. An analyst with a leading investment bank tracks the stock of Mandalays Inc. According to her estimations, the value of Mandalays Inc.'s stock should be $28.95 per share, but Mandalays Inc.'s stock is trading at $33.58 per share on the New York Stock Exchange (NYSE). Considering the analyst's expectations, the stock is currently O In equilibrium Undervalued Overvalued

Explanation / Answer

1 At equilibrium the market price of the stock is equal to its intrinsic value.

2 Overvalued because as the market price is higher than its intrinsic value.

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