Final Answer:
The present value of cash flow allows an investor to assess:
- B) the value of a stream of cash flows in terms of the best and most certain alternative
- C) what equivalent present payment would be equally acceptable in lieu of the investment under consideration.
Correct answer is E) B and C.
Step-by-step explanation:
The present value (PV) of cash flow is a financial concept used to evaluate the worth of future cash flows in today's terms. Option E correctly encapsulates the essence of PV assessment. It combines two critical aspects: first, determining the value of a stream of cash flows concerning the best and most certain alternative available for investment; and second, understanding what present payment would hold equivalent value to the future cash flows being considered.
This calculation is essential for investors as it helps them make informed decisions by comparing the current value of potential future earnings against current investment alternatives or determining the present value that an investment can generate. Therefore, the correct answer is indeed E.
Correct answer: E) B and C