041 Intrinsic Value
Is a way to value an asset. Values the asset as the sum of expected returns (dividends) from it in the future.
Discount_rate = (value_of_the_asset_now)/(value_of_the_asset_after_a_year) = γ
Example: bank interest rate = 1%, discount rate for a bank account = 0.99
The current value of a dollar in the asset is the sum of all the produced dividends in the future, adjusted (using gamma) to the current value of a dollar.
Current_value_of_a_dollar = ∞∑i = 1(γ)i
The value of the asset is the ammount of expected dividends adjusted to the current value.
Current_value_of_the_asset = ∞∑i = 1(dividend⋅γ)i = dividend⋅(1)/(1 − γ)