The concept of market efficiency underpins almost all financial theory and decision models. When financial markets are efficient,

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The concept of market efficiency is fundamental to nearly all financial theories and decision-making models. In an efficient financial market, the price of a security—such as a corporation’s common stock—should reflect the present value of the firm’s expected future cash flows, discounted at the appropriate rate of return. This value is often referred to as the intrinsic value of the stock.

Maria Stroman · Accepted Answer

Equal to Explanation:When the price of a corporation's common stock is equal to the present value of discounted future cash flows, it will show a true representation of the value of the firm and in turn investors will have confidence in the company and its projected performance. As new shares are issued from a company the company issues the shares at a forecasted future value based on the expected cash flows of the business.For example if a company has estimated it will have cash flow of $12 million in the next one year, and it wants to issue 6 million shares. The value of the issued shares will be $12 million/6 million= $2. The firm is leveraging on it forecasted performance and cash flows.

Anonymous · Answer

The concept of market efficiency underpins almost all financial theory and decision models. when financial markets are efficient, the price of a security such as a share of a particular corporation's common stock-should be Equal To  the present value estimate of the firms expected cash flows discounted by its appropriate rate of return (also called the intrinsic value of the stock).Explanation:Intrinsic Value of a stock:- The intrinsic value of a stock can be defined as a  price for the stock based only  on the internal  factors of the company. It eliminates the external factors that  involved in market prices.Another most  widely used method is the discounted cash flow (DCF) method. This method uses cash flows from the business to come up with a value.The calculation of intrinsic value formula of stock is done by dividing the value of the business by the number of outstanding shares of the company in the market.

Dr. Johan Schulist · Answer

sry I don't know the answersry

Anonymous

The concept of market efficiency underpins almost all financial theory and decision models. When financial markets are efficient,

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