RE: 88e price action17 Feb 2020 16:51
Challenges with Intrinsic Value
The trouble with calculating intrinsic value is it’s a very subjective exercise. There are so many assumptions that must be made, and the final net present value is very sensitive to changes in those assumptions.
Each of the assumptions in the WACC (beta, market risk premium) can be calculated in different ways, while the assumption around a confidence/probability factor is entirely subjective.
Essentially, when it comes to predicting the future, it is by definition, uncertain. For this reason, all of the most successful investors in the world can look at the same information about a company and arrive at totally different figures for its intrinsic value.
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