Intrinsic Value Vs Book Value.

[kr.praharsh]

Hello Everyone.
I am not able to understand that :
What’s the Difference Between the BOOK VALUE and the INTRINSIC VALUE of a SECURITY……???
Would Welcome any answer.

 

[bloodline]

Book Value is the per share value of the security based on the book value of the asset minus book value of the liability.
E.G - if you have 10dollar assets and 5 dollar liability, book value = 5 dollars
Intrinsic value of a security is the per share present value of future economic benefits. E.G if your assets can make 100 dollars over 2 years, the present value of the 100 dollars = Intrinsic value.

 

[Greenman72]

If you bought your car for $30,000 two years ago, and you’re going to straight-line depreciate it over five years with zero salvage value, then your book value is $18,000. That’s how much it is worth on the BOOKS.
If the used-car dealer is offering you $13,500 for it, then the market value is $13,500. That’s what you can sell it for, or its MARKET value.
If you put in all the costs and revenues of the car into a DCF model, discount it back at an appropriate rate to find the NPV of the car is worth $50,000, then that is its INTRINSIC value. It’s finance-speak for “how much the analyst believes that it should be worth under a lot of unrealistic assumptions and in an unrealistically perfect market”. Basically, INTRINSIC value is what the analyst think the car is “worth”. (As opposed to what the books say it is worth, or the market says it is worth.)

 

[QuangHoang]

DaSh 1s wrote:

kr.praharsh wrote:
Hello Everyone.
I am not able to understand that :
What’s the Difference Between the BOOK VALUE and the INTRINSIC VALUE of a SECURITY……???
Would Welcome any answer.

I am sorry, but LOL.
The fact that the CFAI or Schweser text couldn’t differentiate the two for you is telling. I never log in to comment, but this comment made me feel good about the Level 2 results tomorrow.

Except, if you notice, s/he is a Level I Candidate.

 

[DaSh 1s]

Troll.

 

[kr.praharsh]

Thank You.