Question

The valuation of a financial asset is based on the concept of determining the present value of future cash flows that this financial asset will accumulate.

True / False.

Answer 1

True.

Step-by-step explanation:

To assess the value of an asset, it is important to determine if its future cash flows will make it worth for an investor to buy it in the present. The present value (PV) of a financial asset is the value in the present of all future cash flows the asset is expected to generate by using a discount rate.