You estimate that the present value of a firm's cash flow is valued at $15 million.The break up value of the firm if you were to sell the major assets and divisions separately would give $20 million.This is an example of what Peter Lynch would call a/an ___________.
A) stalwart
B) slow growth
C) star
D) asset play

Question

Quizplus · Accepted Answer

This is an example of an "asset play," as the break up value of the firm would be higher than the estimated present value of its cash flow. An asset play strategy involves investing in companies that are undervalued based on their assets, rather than their earnings potential.

You Estimate That the Present Value of a Firm's Cash