What’s the difference between the two? To me they are the same… no?
They are related in the sense that the Market price cannot be:
a) higher than NRV
OR
b) lower than NRV minus Profit Margin.
If your NRV is $10 and the Profit would be $2 then:
-
If Market is $6 you have to go with $8 because that is your lower boundary ($10-$2=$8)
-
If Market is $15, you have to go with $10, which is your upper boundary.
-
If Market is $9.21, you can go with that.
Someone asked the same question a while ago (it might have been me):
http://www.analystforum.com/forums/cfa-forums/cfa-level-i-forum/91348503
Also, keep in mind that the term market refers to the replacement cost.
So in this context, both are used interchangably.