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The value of any financial asset is equal to the net present value of expected future...

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

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Answer #1

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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