Asset Valuation: Key Factors to Consider

The Importance of Asset Valuation in Financial Analysis

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Question

In order to value an asset, one needs

Answers

A. the stream of expected future cash flows.

B. the stream of expected future cash flows and the ROE of the asset.

C. the stream of expected future cash flows, and the book value of the asset.

D. the book value of the asset, and its ROE.

E. the stream of expected returns and the required rate of return on the asset. E

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Explanations

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A. B. C. D. E.

Explanation

In order to value an asset, one needs to find the present value of its expected future cash flows. In order to do this, one needs the stream of expected future cash flows, and the required rate of return to discount that stream in order to arrive at its present value.

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