The Basic Principle of Valuation States That the Value of Any

question 45

Multiple Choice

The basic principle of valuation states that the value of any asset is

• A)the present value of all future cash flows generated by the asset.
• B)the sum of all future cash flows generated by the asset.
• C)the present value of next year's cash flow only.
• D)the degree of cash flow riskiness is not a relevant factor in valuation.
• E)None of these choices are correct.

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Definitions:

Fractions

Numerical quantities that represent a part of a whole, typically written with a numerator divided by a denominator.

Mixed Numbers

A number consisting of an integer and a fraction, used to represent quantities greater than a whole but less than two wholes.

Lowest Terms

Lowest terms refer to a fraction that has been simplified to its smallest possible integer numerator and denominator.

Fractions

Fractions represent parts of a whole or any number of equal parts, typically written with a numerator and a denominator, separated by a slash.