Question

Which of the following best describes the valuation​ principle? A. The rate at which we can exchange money today for money in the future by borrowing or investing is the current market interest rate and is same across all banks. B. It is not possible to compare costs and benefits that occur at different points in​ time, in different​ currencies, or with different risks. C. The value of a commodity or an asset to a firm or its investors is determined by its competitive market price. When the value of the benefits exceeds the value of the costs in terms of market​ prices, the decision will increase the market value of the firm. D. If equivalent goods or securities trade simultaneously in different markets across the​ world, they will trade for the same price.

Answer 1

C. The value of a commodity or an asset to a firm or its investors is determined by its competitive market price. When the value of the benefits exceeds the value of the costs in terms of market​ prices, the decision will increase the market value of the firm.

Step-by-step explanation:

Valuation principle is the process by which fair value of an asset is evaluated. It is determined by comparing its competitive market price against its benefits.

As the benefits of an asset exceeds its cost of purchase it increases in value.

Various methods are used to value an asset based on present value and projected value.

For example an analyst can consider the future purchasing power of a stock and use this as a basis for valuation rating