Everything else equal, an asset's value is directly related to:
A) the cost of raising additional capital.
B) the rate of return investors require to invest in that asset.
C) the risk associated with the investment in that asset.
D) the cash flow the asset is expected to generate.
E) the rate of return that the firm must earn to satisfy investors' demands.

Question

Quizplus · Accepted Answer

An asset's value is most directly related to the cash flow it is expected to generate. Other factors may also contribute to an asset's value, such as the risk associated with the investment or the rate of return investors require, but ultimately, the cash flow the asset is expected to produce is the primary driver of its value. This is because the value of an asset is fundamentally based on the future benefits it can provide to its owner.

Everything Else Equal, an Asset's Value Is Directly Related To