ZERO EQUILIBRIUM® APPLIED FINANCE SERIES PART I: FOUNDATIONS OF APPLIED FINANCE TOPIC 6: UNDERSTANDING INVESTMENT VALUATION Having examined the relationship between investment risk and return, the next logical and important consideration is investment valuation. An investment decision is not simply about identifying an asset that is expected to generate returns, and the risks associated with said investment. It is also about determining whether the price being paid for that asset is 'justified' by the economic benefits it is expected to generate. This introduces us to investment valuation, which is the process of estimating the economic or financial worth of an investment using relevant information, assumptions, financial models and analytical methods. It helps investors determine whether an asset is undervalued, fairly valued or overvalued relative to their assessment of its underlying worth. 1/15 #ZeroEquilibrium #AppliedFinance #InvestmentValuation #FinancialMarkets