Which of the following are required inputs of the present value approach?
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A. B. C. D.A
The present value approach is a financial analysis technique used to determine the current value of future cash flows. It is commonly used in the valuation of investment projects, business ventures, and financial instruments such as stocks and bonds.
The required inputs of the present value approach are:
A. Discount rate and the expected cash flows
The discount rate is the rate used to determine the present value of future cash flows. It reflects the opportunity cost of investing capital in a project or investment. The higher the discount rate, the lower the present value of future cash flows.
The expected cash flows are the future cash inflows and outflows expected to be generated by the investment or project. These cash flows must be estimated over a specific period, usually several years, and discounted back to the present value using the discount rate.
B. Expenses paid in cash and dividends disbursed, C. Earnings in valuing stocks and stock-in-trade, and D. Retained earnings and dividend payout ratio are not required inputs of the present value approach.
Expenses paid in cash and dividends disbursed are related to the past performance of a company, and are not used in determining the present value of future cash flows.
Earnings in valuing stocks and stock-in-trade are used in the valuation of stocks, but are not relevant to the present value approach.
Retained earnings and dividend payout ratio are used to determine the amount of dividends a company is likely to pay in the future, but are not required inputs of the present value approach.