Which of the following statements is CORRECT? a. An estimate of a stock’s “true”

Question

Which of the following statements is CORRECT? a. An estimate of a stock’s “true” value based on accurate risk and return data is the “market” value of stock. b. The stock value based on perceived but possibly incorrect information as seen be the marginal investor is the “intrinsic” value of stock. c. The stock price calculated based on using existing financial information is the “market” price of the stock. d. Management’s goal should be to take actions designed to maximize the firm’s intrinsic value rather than market price of the stock.

Explanation / Answer

Correct option is "D" -Management’s goal should be to take actions designed to maximize the firm’s intrinsic value rather than market price of the stock

since a stock's long run value is more closely related to its intrinsic value rather than its current price ,therefore management goal should be to maximize intrinsic value.

other parts explanation:

A)an estimate of a stock’s “true” value based on accurate risk and return data is the “market” value of stock -its intrinsic value not market value

b)The stock value based on perceived but possibly incorrect information as seen be the marginal investor is the “intrinsic” value of stock - its market value

c)The stock price calculated based on using existing financial information is the “market” price of the stock -based on existing information ,intrinsic value is calculated.

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