The value of any financial asset is equal to the net present value of expected future cash flow derived from the asset, discounted at:
a. The industry cost of capital
b. The company’s capitalization rate
c. The internal rate of return
d. The investors’ required rate of return
Option D is correct. The investors’ required rate of return
To calculate the value of any financial asset, we discount the future cash flow we are going to receive in the future at a rate which is considered as Required Rate of Return. This rate is basically the expected Return of Market, which they expect to earn from any section of market.
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