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FINA537 Equity Valuation
Assignments for Practice (No need to submit)
Question 1
Discounted cash flow valuation is based upon the notion that the value of an asset is the
present value of the expected cash flows on that asset, discounted at a rate that reflects
the riskiness of those cash flows. Specify whether the following statements about
discounted cash flow valuation are true or false, assuming that all variables are constant
except for the variable discussed below:
A. As the discount rate increases, the value of an asset increases.
B. As the expected growth rate in cash flows increases, the value of an asset increases.
C. As the life of an asset is lengthened, the value of that asset increases.
D. As the uncertainty about the expected cash flows increases, the value of an asset
increases.
E. An asset with an infinite life (i.e., it is expected to last forever) will have an infinite
value.
Question 2
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This note was uploaded on 04/12/2010 for the course FINA 537 taught by Professor Luxiaolei during the Spring '09 term at HKUST.
 Spring '09
 LUXIAOLEI
 Valuation

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