When analysts and investors determine the value of a firm's stock, they should consider:
A) the size of the expected cash flows associated with owning the stock.
B) the timing of the cash flows.
C) the riskiness of the cash flows.
D) all of the above.

Question

Quizplus · Accepted Answer

All of the choices are important factors to consider when determining the value of a firm's stock. The size of expected cash flows indicates the potential profitability of owning the stock, while timing of the cash flows informs investors of when they can expect to receive their returns. Lastly, the riskiness of the cash flows is an essential factor to consider. Investors will likely demand a higher return from a risky investment compared to a less risky one. Therefore, all three factors- the size, timing, and riskiness of cash flows- should be taken into account when determining the value of a firm's stock.

When Analysts and Investors Determine the Value of a Firm's