If a Portfolio Manager Had to Estimate the Fair Value

question 8

Multiple Choice

If a portfolio manager had to estimate the fair value of investments in timber,which of the following would he/she most likely identify as the level of inputs to determine this?

• A) Level 1.
• B) Levels 1 and 2.
• C) Levels 2 or 3.
• D) All levels would be applicable.

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Definitions:

Net Present Value

A financial metric that calculates the worth of a projected stream of cash flows by discounting them back to their value in today's dollars.

Incremental Cash Flows

Additional cash receipts or payments expected from a new project or investment, used in capital budgeting analysis.

Salvage Value

The estimated residual value of an asset at the end of its useful life.

Depreciation

The accounting method of allocating the cost of a tangible asset over its useful life, reflecting the decrease in value over time.