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Building Less Any Loans: Book Value Is The Net Value of What The Company Owns-Machinery, Furniture

The document discusses intrinsic value and how it relates to whether to buy a company's stock. It notes that the company originally issued shares at Rs. 300 that are now worth Rs. 900 based on the company's assets and earnings, representing the stock's intrinsic value. However, the shares are currently trading at Rs. 1250 due to high demand, above their real intrinsic value. Therefore, according to the document, one should not buy the stock now since it is trading at a price higher than its intrinsic worth.

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28 views1 page

Building Less Any Loans: Book Value Is The Net Value of What The Company Owns-Machinery, Furniture

The document discusses intrinsic value and how it relates to whether to buy a company's stock. It notes that the company originally issued shares at Rs. 300 that are now worth Rs. 900 based on the company's assets and earnings, representing the stock's intrinsic value. However, the shares are currently trading at Rs. 1250 due to high demand, above their real intrinsic value. Therefore, according to the document, one should not buy the stock now since it is trading at a price higher than its intrinsic worth.

Uploaded by

nareshmca123
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Book value is the net value of what the company owns- machinery, furniture,

building less any loans


Intrinsic Value
Lets assume that the total shares of the company are 50,000 shares. So, 40% available to the
public is 20,000 shares. The issue price was Rs 300 (60 lakhs/20000) but, now the share is worth
Rs 900(180 lakhs / 20000). Since a section of the public feels that this winning streak of the
company would continue, there is heavy demand for the share and due to this, the price keeps
moving up.
Suppose the price is Rs 1250 now. Should you buy?
The answer is no. Why? Because, the shares are trading above the real value of Rs 900. This
real value is also called intrinsic value.

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