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ABC Company Share Currently Has a Market Value Equivalent to Its

Question 38

Multiple Choice

ABC Company share currently has a market value equivalent to its intrinsic value. Marco perceives that ABC Company is increasing its level of risk and therefore Marco increases his required rate of return on ABC share. This change in the required rate of return


A) will change the intrinsic value but the direction of the change cannot be determined.
B) will reduce the intrinsic value of ABC share to Marco.
C) is a signal to Marco that he should buy more ABC Company share.
D) will increase the intrinsic value of ABC share to Marco.

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