Which of the followings are likely to increase the value of an asset? Question 14 options:...

Which of the followings are likely to increase the value of an asset?

Question 14 options:

	An increase in the amount of expected cash flows from the asset
	A delay in the timing of the cash flows from the asset.
	An increase in risk of the cash flows from the asset
	Statements a and c are correct.

Solutions

Expert Solution

1) An increase in the amount of expected cash flows from the asset: YES. Generating and maintening adequate cash flow is very important task for any business. companies prefers to go on with high vollume of cash flow. Any circumstance of thing which assist thier this moto is automatically valuable for them.Since the demand of such assets are heigh amoung the companies, Hence we can say that the market value of any asset increases when there is an increase in the amount of expected cash flows from the asset.

2) A delay in the timing of the cash flows from the asset: NO. Any delay in the cash flows from the asset may effect the working capital requirement of any company and also its regular operations. Such delays may cause due to depriciation, production timing or by any other reasons. This wont be helpfull to increase the market value of the asset.

3) An increase in risk of the cash flow from the asset: NO . The status of Risk in cash flow will never increase the value of assset. companies usually dont prefer to keep such assets from which the returns are doubtfull unless there are some chances of getting something extraordinery from it. Hence companies wont demand such assets with risky cash flows .

jeff jeffy answered 1 year ago

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