Final answer:
In an efficient market, intrinsic values are determined by analyzing expected cash flows, risk, and investor heuristics and tendencies.
Step-by-step explanation:
In an efficient market, intrinsic values are determined by an analysis of expected cash flows and the risk associated with those cash flows, as well as investor heuristics and tendencies. This means that the intrinsic value of an asset is based on its actual worth and not influenced by external factors. For example, in stock valuation, intrinsic value is calculated by estimating future cash flows and discounting them to present value using appropriate discount rates.
Investors use various methods to analyze intrinsic values, such as discounted cash flow analysis, price-to-earnings ratio, and book value. These methods help investors determine whether the current market price of an asset is overvalued or undervalued. However, it's important to note that in an efficient market, investors' heuristics and tendencies can also impact the determination of intrinsic values.
Therefore, the statement is true - intrinsic values in an efficient market are determined by an analysis of expected cash flows, risk, and investor heuristics and tendencies.