The Financial Sector $-$ End of Chapter Problem

a$.$ You are contemplating buying stock in Algoma Steel $($ASTL$),$ listed on the Toronto Stock Exchange. What pieces of

information would you use to assess the company's fundamental value?

Information needed to assess fundamental value

total number of shares outstanding for ASTL

Information not needed to assess fundamental value

sum of discounted future profits

for ASTL.

stock prices of other steel company stocks

Answer Bank

b$.$ How would you decide whether to purchase the stock based on fundamental value?

Decide after

adding the stream of future profits and multiplying by shares outstanding. Buy if the stock price is lower than

fundamental value.

adding the discounted stream of future profits and dividing by shares outstanding. Buy if the stock price is lower than

the fundamental value.

comparing the $\frac{P}{E}$ ratio with those of other industrial stocks to see which has the highest fundamental value.

comparing the P$/$E ratio with those of other steel company stocks to see which fundamental value is higher.you are contemplating buying stock in algoma steel