Which of the following is the best statement of the Valuation Principle?

Question

Quizplus · Accepted Answer

The Valuation Principle states that the value of a commodity or an asset to the firm or its investors is determined by its competitive market price. When the value of the benefits exceeds the value of the costs in terms of market prices, the decision will increase the market value of the firm. This statement incorporates the idea of opportunity cost, as well as the concept of making decisions based on comparing costs and benefits in terms of market prices. Option B is incorrect because it suggests that costs and benefits cannot be compared across time, currency, or risk, which is not true. Option C is incorrect because it describes the Law of One Price, which is related but not the same as the Valuation Principle. Option D is incorrect because it only relates to the market interest rate and does not address the valuation of commodities or assets.

Which of the Following Is the Best Statement of the Valuation