NACVA Exam CVA Topic 3 Question 90 Discussion

Actual exam question for NACVA's CVA exam

Question #: 90
Topic #: 3

[All CVA Questions]

The value of an asset is the present value of its expected returns. Specifically, you expect an asset to provide a stream of returns during the period of time you own it. To convert this estimated stream of returns to a value for the security, you must discount this stream at your required rate of return. This process requires estimates of (1) the stream of expected returns and (2) the required rate of return on the investment. Value today always equals future cash flow discounted at the opportunity cost of capital. This is actually:

ATheory of valuation

BTheoretical and practical soundness of the valuation approach

CReturn on investment

DLeverage ratios

Show Suggested Answer

Suggested Answer: A

by Leonardo at Jul 04, 2024, 04:10 AM

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Wei

Ah, the age-old question of how to properly value an asset. I feel like I learned this back in Econ 101, but it's always good to refresh the memory. As long as I remember to discount those future cash flows, I should be golden. Now, where did I put my financial calculator?

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Tonja

5 days ago

Hmm, this question is really getting to the heart of finance. I better not try to 'wing it' here - I need to make sure I have a solid grasp of the time value of money and discounted cash flow analysis. No room for financial funny business on this exam!

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Elbert

8 days ago

I agree, this is a straightforward question on the basic theory of asset valuation. The key is recognizing that the value of an asset today is the present value of its expected future returns, which requires estimates of both the cash flow stream and the discount rate. Seems like a textbook definition to me.

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Cherry

11 days ago

This question is really testing my understanding of the fundamental principles of asset valuation. The correct answer is A) Theory of valuation, as it describes the core concept of discounting expected future cash flows to arrive at a present value.

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Larue

12 days ago

I'm not sure, but I think it might be B) Theoretical and practical soundness of the valuation approach, as it seems to involve both theory and practice.

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Jerlene

13 days ago

I agree with Cherilyn, because it makes sense to value an asset based on expected returns and required rate of return.

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Cherilyn

16 days ago

I think the answer is A) Theory of valuation.

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