The value, or price, of any asset is the present value of its future cash flows.

Question

Quizplus · Accepted Answer

This assertion is a fundamental principle of finance known as the discounted cash flow (DCF) method. It is used to estimate the value of an investment or asset by calculating how much cash it is expected to generate in the future and discounting those cash flows back to their present value using a suitable interest rate. Therefore, the value of an asset or investment is dependent on the present value of its expected future cash flows.

The Value, or Price, of Any Asset Is the Present