Capital Budgeting : the process of analyzing potential
expenditures on L-T assets (or fixed assets) & deciding
whether those investments should be undertaken.
The process of capital budgeting consists of :
Value (or price) of an asset = PV of the future
CFs to be generated from that asset.
i.e., Price (or value) = DCFs.
In the valuation exercise,
1) figure out future CFs from an asset
2) find PV of the future CFs.
13. Return, Risk, Security
Efficient Market Hypothesis
Efficient Market Hypothesis (EMH)
Says that "since an asset's current market price
fully reflects all available information affecting
the asset's value, it is not possible to