AB Industries is an all-equity firm that has $10 per share in cash and a book value per share of $12. At which one of the following market prices would you know with absolute certainty that the stock was mispriced?
A) $9
B) $10
C) $11
D) $12
E) $13

Question

Quizplus · Accepted Answer

If AB Industries has $10 per share in cash, then the stock cannot be correctly priced below this amount because the cash value alone supports a $10 per share valuation, not accounting for any additional assets or business operations. Therefore, a price of $9 would indicate the stock is mispriced.

AB Industries Is an All-Equity Firm That Has $10 Per