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Unformatted text preview: traumatic Titanic memories, you should still
take the opportunity to get the Celine Dion tickets. As we emphasized earlier, whether this
opportunity is attractive depends on its net value using market prices. Because the value of
the Celine Dion tickets is $40 more than the value of the Justin Bieber tickets, the opportunity
is appealing. Once we use market prices to evaluate the costs and benefits of a decision in terms
of cash today, it is then a simple matter to determine the best decision for the firm. The
best decision makes the firm and its investors wealthier, because the value of its benefits
exceeds the value of its costs. We call this idea the Valuation Principle:
valuation principle The
value of a commodity or
an asset to the firm or its
investors is determined
by its competitive market
price. The Valuation Principle:
The value of a commodity or an asset to the firm or its investors is determined by
its competitive market price.
The Valuation Principle provides the basis for decision making throughout this text.
In the remainder of this chapter, we first apply it to decisions whose costs and benefits
occur at diffe...
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This note was uploaded on 02/07/2014 for the course MIS 304 taught by Professor Mejias during the Spring '07 term at University of Arizona- Tucson.
- Spring '07