The Fundamental Principle of Finance Is That the True or Correct

question 8

Multiple Choice

The fundamental principle of finance is that the true or correct price of an asset equals the ________ of all cash flows that the owner of the asset expects to receive during its life.

• A) present value
• B) future value
• C) projected value
• D) asset value

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Definitions:

Replacement Projects

Investments made to replace worn-out or obsolete assets with new assets.

Expected Savings

Expected savings refer to the projected amount of money saved over a specific period due to cost reduction strategies, efficiencies, or bargain purchases.

Depreciation

The process of allocating the cost of a tangible asset over its useful life, reflecting the decline in the asset's value over time.

Taxes

Compulsory financial charges or some other type of levy imposed upon a taxpayer by a governmental organization.