For risk management purposes, the value of an asset should be based on:

A.
original cost.

B.
net cash flow.

C.
net present value.

D.
replacement cost.

Explanation:

The value of a physical asset should be based on its replacement cost since this is the amount
that would be needed to replace the asset if it were to become damaged or destroyed. Original
cost may be significantly different than the current cost of replacing the asset. Net cash flow and
net present value do not accurately reflect the true value of the asset.