What determines the value of an economic asset (as opposed to an asset that has  value for reason of sentiment)?

Question #2. If we know the projected cash flows from loan notes and their current market value, what approach would we take to deducing the cost of the loan notes?

Question #3. Why does it seem likely that businesses have a 'target' gearing ratio?

Question #4. What is wrong with using the cost of the specific capital used to finance a project as
the discount rate in relation to that project?

Question #5. When calculating the weighted average cost of capital (WACC), should we use market values or balance sheet values as the weights of debt and equity? Explain your response.

Answer rating: 100% (QA)

1 The value of an economic asset is determined by its expected future cash flows and the risk associated with those cash flows The more uncertain the ... View the full answer