Explain the different types of value

Question

What will be an ideal response?

Answer 1

The term value is often used in different contexts, depending on its application. Book value is the value of an asset as
shown on a firm's balance sheet. It represents the historical cost of the asset rather than its current worth. Liquidation
value is the dollar sum that could be realized if an asset were sold individually and not as part of a going concern. The
market value of an asset is the observed value for the asset in the marketplace. This value is determined by supply and
demand forces working together in the marketplace, whereby buyers and sellers negotiate a mutually acceptable price
for the asset. The intrinsic, or economic, value of an assetNalso called the fair valueNis the present value of the asset's
expected future cash flows. This value is the amount an investor should be willing to pay for the asset given the
amount, timing, and riskiness of its future cash flows. Once the investor has estimated the intrinsic value of a security,
this value could be compared with its market value when available. If the intrinsic value is greater than the market
value, then the security is undervalued in the eyes of the investor. Should the market value exceed the investor's
intrinsic value, then the security is overvalued.