While the General Concepts of Investment Value and Market Value

question 20

Multiple Choice

While the general concepts of investment value and market value are very similar, there is an important distinction between the two. All of the following statements regarding investment value are true EXCEPT:

• A) Investment value is based on the expectations of a typical, or average, investor.
• B) Investment value is a function of estimated cash flows from annual operations
• C) Investment value takes into consideration estimated proceeds from the sale of the property
• D) Investment value applies a discount rate to future cash flows.

---

Definitions:

Economically Efficient

Refers to a situation where resources are allocated in a way that maximizes the net benefit to society.

Revenue

The income generated from normal business operations and includes discounts and deductions for returned merchandise.

Consumer Sovereignty

The principle that the consumer's preferences determine the production of goods and services within an economy.

Market System

An economic system where decisions regarding investment, production, and distribution are guided by the forces of supply and demand and prices mediate transactions.