# 2-3: What is a company worth?

## Why company value matters

A company has a **true** value and a **stock price**. The true value is not
always readily apparent, and the stock value goes high or low over time,
depending on trends in the market. Like always, when a stock is overvalued we
want to **sell** and when a stock is undervalued, we want to **buy**.

**Intrinsic value**- the value of a company as estimated by future dividends**Book value**- assets that the company owns**Market cap**- value of the stock on the market

Below is a high-level overview from the lecture of the concepts above:

## The value of a future dollar

This section of the lecture discusses the value of a future dollar - how we can calculate how much a dollar will be worth given a particular interest rate on a bond.

The equation is as follows:

`price_value = future_value / (1 + interest_rate)**years`

Obviously, a dollar now is worth more than a dollar in the future. The high-level representation below displays how to calculate price value against future value given an interest rate.

## Intrinsic value

The lecture provides a breakdown on how to calculate intrinsic value, given a
particular **interest rate** or **discount rate**. The equation is essentially
as follows:

`intrinsic_value = future_value / discount_rate`

## Market capitalization

**Market capitalization** or **market cap** is simple:

`market_cap = num_shares * share_price`