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correct response: formula used in capitaliz-

correct response: formula used in capitaliz-

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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3. 

The following statements are factual discussion about Capitalization of Earnings Method, except Select the correct response: The formula used in capitalization of earnings is actually grossing up the future earnings using the capitalization rate to come up with the estimated asset value. You may use past earnings in Capitalization of Earnings method for cases wherein earnigns are fixed. in capitalization of earnings method, the value of the asset or the investment is determined using the anticipated earnings of the company divided by the cost of capital. Cost of capital used in Capitalization Earnings method is equivalent to the expected yield or the required rate of return.
Transcribed Image Text:The following statements are factual discussion about Capitalization of Earnings Method, except Select the correct response: The formula used in capitalization of earnings is actually grossing up the future earnings using the capitalization rate to come up with the estimated asset value. You may use past earnings in Capitalization of Earnings method for cases wherein earnigns are fixed. in capitalization of earnings method, the value of the asset or the investment is determined using the anticipated earnings of the company divided by the cost of capital. Cost of capital used in Capitalization Earnings method is equivalent to the expected yield or the required rate of return.
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