Which of the following will most directly determine the market price of a business or physical asset?
a. cost of the asset
b. expected future net earnings derived from the asset
c. book value (original purchase price minus depreciation) of the asset
d. age of the asset
B
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Households in the United States more completely smooth out expenditures on
A) durable goods and nondurable goods than on services. B) durable goods than on nondurable goods and services. C) nondurable goods and services than on durable goods. D) services and durable goods; nondurable goods.
The nominal interest rate in the U.S. is 5% and the nominal interest rate in Canada is 3%. The spot value of the U.S. dollar is 1 ($/Canadian dollar) and the forward rate is 1.2 ($/Canadian dollar). Which of the following is NOT true?
A) The dollar is likely to appreciate in spot markets. B) The interest parity condition does not hold. C) The dollar is trading at a forward discount. D) Money will flow into the Canada.