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.
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 :
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