Question

Which of the following statements is FALSE? The first step in evaluating a project is to...

Which of the following statements is FALSE?

The first step in evaluating a project is to identify its costs and benefits.

Competitive market prices allow us to calculate the value of a decision without worrying about the tastes or opinions of the decision maker.

Valuation principle says if equivalent investment opportunities trade simultaneously in different competitive markets, then they must trade for the same price in both markets.

A competitive market is a market where goods can be bought and sold at the same price.
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Answer #1

Valuation Principle: Valuation principle says that the value of any asset is the present value of the expected cashflows.

The Law of One Price:  If equivalent investment opportunities trade simultaneously in different competitive markets, then they must trade for the same price in both markets.

Therefore the statement given in option(c) is not a part of Valuation Principle, it is part of Law of One Price.

Hence, Option(c) among the other options is FALSE.

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