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Agree on cash flows = agree on investment value?

If investors agree on the amount, timing, and certainty of after-tax cash flows associated with an investment proposition, and if they have the same opportunity cost of capital, would they generally place the same investment value on the property? Explain your answer.

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If investors agree on the amount, timing, and certainty of after-tax cash flows associated with an investment proposition, they agree on a lot. But the investment value is not just a function of the amount, timing, and certainty of after-tax cash flows associated with an investment. Two other critical variables change the investment value: (1) a measure of the time value of money and (2) risk.

The time value of money is usually a function of the cost of capital ...

Solution Summary

Your tutorial is 277 words and gives you two main ideas about why investors do NOT come up with the same investment value even if they prediction identical amount, timing, and certainty of after-tax cash flows for the investment proposition.

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