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Is it better for a firm’s actual stock price in the market to be under, over,...

Is it better for a firm’s actual stock price in the market to be under, over, or equal to its intrinsic value? Would your answer be the same from the standpoints of stockholders in general and a CEO who is about to exercise a million dollars in options and then retire? Explain. (250 words)

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The firm's actual market stock price can be above, below or equal to the firm's intrinsic value. The benefits of the market stock price being above or below the intrinsic level accrue to different parties under different circumstances. A stockholder would obviously prefer the stock's price to be above the intrinsic value level as the same results in greater benefits accruing to the stockholder. A CEO who is about to exercise million dollar worth of options would also want the market price to be above the intrinsic level, as greater the price of the stock greater is the CEO's option value. However, an investor looking at investing in the stock would prefer the market price to be either equal to or below the intrinsic value level so as to not overpay for the stock.

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