Question

The present value of a firm’s projected cash flows are $15 million. The breakup value of the firm if you were to sell the major assets and divisions separately would be $20 million. This is an example of what Peter Lynch would call a(n)

Answer 1

Answer:

Asset play

Explanation:

An asset play is an incorrectly-valued stock which is attractive because its combined asset value is higher than its market capitalization.

The total dollar market value of all the company's outstanding shares, calculated by multiplying a company's shares outstanding by the current market price of one share.

This question is an example of an Asset play because an asset play the combined asset value is higher than the market capitalization when the value of the stock is introduced. This is helpful for firms because the firm can say they are selling the assets for $20 million instead of $15 million.