Question

When analysts and investors determine the value of a firm's shares, they should consider the:

size of the expected cash flows

timing of the cash flows

riskiness of the cash flows

all of the above

size and riskiness of the cash flows but not their timing

size and timing of the cash flows but not their riskiness

none of the above

Answer 1

While determining the value of the firm all the following should be considered : -

• size of the expected cash flows
• timing of the cash flows
• riskiness of the cash flows

Size of the cash flows are important as it is the primary factor to determine the value. Also, timing is also important because of the rule of time value of money, A dollar today is worth more than the dollar tomorrow or after a year. Also, if there are risk wthether the cash will be received or not in future considering the future prospects, it should also be consiedered.

Therefore, all the above is the correct answer. Option D is correct.

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