The basic principle of valuation states that the value of any asset is
A)the present value of all future cash flows generated by the asset.
B)the sum of all future cash flows generated by the asset.
C)the present value of next year's cash flow only.
D)the degree of cash flow riskiness is not a relevant factor in valuation.
E)None of these choices are correct.

Question

Quizplus · Accepted Answer

The basic principle of valuation is that the value of any asset is equal to the present value of all future cash flows generated by the asset. This means that the expected cash flows from the asset in the future are discounted to their present value using an appropriate discount rate. Therefore, choice A is the correct answer.

The Basic Principle of Valuation States That the Value of Any