Valuation of financial assets requires knowledge of
A)future cash flows.
B)an appropriate discount rate.
C)past asset performance.
D)future cash flows and an appropriate discount rate.

Question

Quizplus · Accepted Answer

Valuation of financial assets requires both future cash flows and an appropriate discount rate. The future cash flows represent the potential economic benefits that the asset will generate for its owner, while the appropriate discount rate accounts for the time value of money and the risk associated with the asset. Past asset performance may inform future expectations, but it is not sufficient to determine the value of the asset.

Valuation of Financial Assets Requires Knowledge of