Question

How do you calculate the value of any asset?

Answer 1

Value of the asset can be calculated using the Discounting Cash Flow method ( DCF) . In this method future cash flows which are arising out of the asset are discounted at the risk adjusted rate of return or discount rate . The discount rate should be such which reflects the risk of the cash flows from the asset. the cash flows should be estimated on the basisof cash flows which has been generated in past from similar asset or on the basis of growth rate estimated on the present cash flows generated from the asset. All the cash flows are put in the DCF model and then they are discounted using the appropriate discount rate . The resulting present value shall be value of the asset.