One of the basic financial principles is that the value of any asset (whether it be...

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Finance

One of the basic financial principles is that the value of anyasset (whether it be a stock, a bond, or a firm as a whole) is thepresent value of that asset’s future cash flows. Finding presentvalues requires determining a discount rate. Assume you want to buya business, and you want to find the present value of its futurecash flows. Name at least one variable you should consider indetermining the correct discount rate to use and explain its rolein discount rate determination.

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Discounting is to bring to the present the values of the future cash flows occuring at different points in the timeline subsequent to buying an asset or any type of investment or proceeding on a capital project All the cash outflows inflows are brought to time t0 and on the basis of that netted present value the asset is bought or the project is undertaken or both rejected For bringing the above cash flows to their present values we See Answer

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