For a going concern, company value can be expressed by:
A)dividing permanent income by the cost of capital.
B)multiplying permanent income by the cost of capital.
C)dividing permanent income by the market value per share.
D)multiplying permanent income by the market value per share.

Question

Quizplus · Accepted Answer

For a going concern, company value can be expressed by dividing permanent income (future cash flow) by the cost of capital (required rate of return). This is known as the discounted cash flow (DCF) method and is widely used in finance to value companies. The other choices (B, C, D) are incorrect as they do not accurately represent the DCF method for valuing a company.

For a Going Concern, Company Value Can Be Expressed By