109k views
4 votes
What is the value of asset a if the risk of asset a is 15?

User Kellyn
by
8.7k points

1 Answer

6 votes

Final answer:

The value of asset A is determined through discounted cash flows, considering a 15% discount rate (risk). The present value of all future cash flows adds up to a total of $51.3 million.

Step-by-step explanation:

The value of asset A can be determined through a process known as discounted cash flows (DCF), if we assume that the risk mentioned in the question is related to the asset's discount rate. The formula for DCF is:

Present Value (PV) = Future Value received / (1 + Interest rate)^numbers of years t

Given the information, we calculate the present values (PV) of the cash flows:




Add up all the PVs to get the total value of the asset:

$51.3 million

This assumes that all the cash flows are received exactly at the end of each period and that the discount rate, signifying risk, remains constant at 15%.

User Elim Garak
by
9.1k points

No related questions found

Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

9.4m questions

12.2m answers

Categories