Hey guy, Just did a sample question and I got really confused about the answer. A stock’s market value is $19 and I have calculated its intrinsic value to be $19.57 based on DDM. Now the question asked me to state whether the stock is over-valued or under valued and the answer key says it is over. I thought if the intrinsic value > market value, the stock would be under valued. Am I wrong?
That’s right (IV>MV = UV) so you (may) have to re-examine you inputs for how you derived the value? Can you post it?