Unit $1$: Homework Problems

$1-1$

What is a firm's intrinsic value? Its current stock price? Is the stock's "true" long$-$run value more closely related to its intrinsic value or to its current price?

$1-2$

in equilibrium?

When is a stock said to be in equilibrium? Why might a stock at any point in time not be

$1-4$

Is it better for a firm's actual stock price in the market to be under, over, or equal to its intrinsic value? Would your answer be the same from the standpoints of stockholders in general and a CEO who is about to exercise a million dollars in options and then retire?

Explain.

$1-6$

What are the various forms of business organization? What are the advantages and disadvantages of each?

$1-7$

Should stockholder wealth maximization be thought of as a long$-$term or a short$-$term goal? For example, if one action increases a firm's stock price from a current level of $$20$

to $$25$ in $6$ months and then to $$30$ in $5$ years, but another action keeps the stock at $$20$ for several years but then increases it to $$40$ in $5$ years, which action would be better?

Think of some specific corporate actions that have these general tendencies.

$2-1$

How does a cost$-$efficient capital market help reduce the prices of goods and services?