By the capitalization-of-cash flows method, the value of an asset is a function of
A)the book value of the asset
B)the risk of the asset's cash flows
C)the age of the asset
D)both the book value and the age of the asset

Question

Quizplus · Accepted Answer

The capitalization-of-cash flows method bases the value of an asset on the risk associated with its expected future cash flows. This method takes into account the expected amount and timing of cash flows, the risk of those cash flows actually occurring, and the investor's desired rate of return. Book value and age of the asset are not factors considered by this method.

By the Capitalization-Of-Cash Flows Method, the Value of an Asset