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when you value assets you are implicitly assuming that ?

**When You Value Assets, You Are Implicitly Assuming That…**

As investors, analysts, and business owners, we often find ourselves valuing assets whether it’s a company, a stock, or a property. But have you ever stopped to think about what’s behind this valuation process? What implicit assumptions are we making when we assign a value to a particular asset?

According to financial expert Tony Sheng, when you value assets, you are implicitly assuming that **the market is sometimes wrong, but that it corrects itself eventually**. This is option C. The market is never always right or always wrong; there are times when market prices don’t accurately reflect the true value of an asset.

Let’s break it down. When we value assets, we are essentially using market prices as a reference point to determine their value. But what if the market is inefficient and prices are distorted for some reason? In such cases, using market prices as a valuation method might lead to incorrect conclusions.

So, what do we do? We implicitly assume that the market will eventually correct itself, and prices will reflect the true value of the asset. This is a crucial assumption, as it helps us make decisions about whether to buy, sell, or hold a particular asset.

But here’s the thing: this assumption is not always valid. Markets can be quite inefficient, and it’s not uncommon for prices to be misaligned for extended periods. In such cases, our implicit assumption may lead to incorrect valuation conclusions.

So, what can we do to minimize the impact of this assumption? One approach is to diversify our portfolio and use a combination of valuation methods to get a better sense of an asset’s true value.

In conclusion, when we value assets, we are implicitly assuming that the market is sometimes wrong but that it corrects itself eventually. This assumption is not always valid, and it’s essential to be aware of its limitations to make informed investment decisions.

**Source:**

* Anthony Sheng, “The Implicit Assumption of Valuation,” Substack.
* Course Hero, “2 When you value assets you are implicitly assuming that a The market…”
* Chegg, “Solved When you value assets, you are implicitly assuming…”
* Quizlet, “Damodaran Valuation Practice Test Questions Flashcards.”
* StuDocu, “Valuation Damodaran MCQ merged.”
* New York University, “Session’1:Post’Classtests’ – Valuation.”
* Quizlet, “fin 323 ch 16 Flashcards.”
* Course Hero, “Upload 2.docx.”
* Course Hero, “Solved When you value assets, you are implicitly assuming that…,” tutors-problems.

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