Extrinsic value
This query is : Resolved
13 August 2015
What does Extrinsic value mean in case of Valuation of shares in Accounts?
13 August 2015
try to remember the words EXPLICIT and IMPLICIT to avoid the confusion if any.
intrinsic value https://www.investopedia.com/terms/i/intrinsicvalue.asp
extrinsic value
https://www.investopedia.com/terms/e/extrinsicvalue.asp
please try these site and get back if any further help is needed.
intrinsic value https://www.investopedia.com/terms/i/intrinsicvalue.asp
extrinsic value
https://www.investopedia.com/terms/e/extrinsicvalue.asp
please try these site and get back if any further help is needed.
14 August 2015
I didn't understand the definition provided in investopedia site. Can u explain in detail?
14 August 2015
Presuming you are aware of the OPTION market.
Cash Nifty trading at : 8510
Product: Call option,
Date of expiry: 24/09/2015
Strike Price : 8400
Market price : 265.
Intrinsic value = 8510 - 8400 = 110
(This is the price at which the product, call option, should have been traded. But the market being BULLISH is ready to pay higher than the intrinsic value. This is because the market is ready to consider the TIME value of money)
Extrinsic value in this example is 265 which is 155 points above its intrinsic value.
Please note, the figures are picked up from the NSE live as at 15.00 on 14/05/2015.
Your views please.
Cash Nifty trading at : 8510
Product: Call option,
Date of expiry: 24/09/2015
Strike Price : 8400
Market price : 265.
Intrinsic value = 8510 - 8400 = 110
(This is the price at which the product, call option, should have been traded. But the market being BULLISH is ready to pay higher than the intrinsic value. This is because the market is ready to consider the TIME value of money)
Extrinsic value in this example is 265 which is 155 points above its intrinsic value.
Please note, the figures are picked up from the NSE live as at 15.00 on 14/05/2015.
Your views please.
17 August 2015
So it means any thing over and above the intrinsic value.correct?
18 August 2015
Good question. In fact your counter question is the indication that you have started WORKING on it. Keep it up.
Since your original query is from the topic VALUATION of SHARES, let me try giving another example to answer your query.
A company issued share of face value INR100 to Mrs H for INR 96. Here in the absence of any other information given to us in the question, the intrinsic value of the share is INR 100, although the extrinsic value is INR 96, for which Mrs H could get those shares for.
So to say, the INHERENT value is called as INTRINSIC value. The EXTERNAL factors play major role on deciding the price... this price as decided by the EXTERNAL factors constitutes EXTRINSIC value. It can bend to any direction.......More or Less....
Your views please.
Since your original query is from the topic VALUATION of SHARES, let me try giving another example to answer your query.
A company issued share of face value INR100 to Mrs H for INR 96. Here in the absence of any other information given to us in the question, the intrinsic value of the share is INR 100, although the extrinsic value is INR 96, for which Mrs H could get those shares for.
So to say, the INHERENT value is called as INTRINSIC value. The EXTERNAL factors play major role on deciding the price... this price as decided by the EXTERNAL factors constitutes EXTRINSIC value. It can bend to any direction.......More or Less....
Your views please.
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28 September 2015
In reference to the example stated by your good self, my understanding was not correct as my perception was anything over and above intrinsic value is extrinsic value. But another doubt that arose is in the eg stated above, wont it be considered as a case of discount? as the shares are issued below the face value.
Kindly clarify the same.
Regards
Kindly clarify the same.
Regards
28 September 2015
In reference to the example stated by your good self, my understanding was not correct as my perception was anything over and above intrinsic value is extrinsic value. But another doubt that arose is in the eg stated above, wont it be considered as a case of discount? as the shares are issued below the face value.
Kindly clarify the same.
Regards
Kindly clarify the same.
Regards
28 September 2015
yes, absolutely right.
Extrinsic value of say 10 rupee indian coin is INR10 but intrinsic value is somewhat around INR 2.50 (Say by melting the coin and selling at metal cost rate etc). So also for the currentcy note. Extrinsic value is more where as intrinsic value is what? A piece of paper....scrap sale paper is sold at Rs.8 per kg????????
As you have pointed out, the said phenomenon of shares is also called as shares sold at discount.
Extrinsic value of say 10 rupee indian coin is INR10 but intrinsic value is somewhat around INR 2.50 (Say by melting the coin and selling at metal cost rate etc). So also for the currentcy note. Extrinsic value is more where as intrinsic value is what? A piece of paper....scrap sale paper is sold at Rs.8 per kg????????
As you have pointed out, the said phenomenon of shares is also called as shares sold at discount.
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