The valuation of a firm is best described as depending on:
A)the market value of the assets employed by the firm.
B)the value of land and property held by the firm.
C)the value that the market places on the combined debt and equity of the firm.
D)the capitalised value of the dividends paid by the firm.

Question

Quizplus · Accepted Answer

The valuation of a firm is based on the market value of its debt and equity, which reflects investors' expectations about the firm's future profitability and cash flows. This may be influenced by factors such as the firm's assets and property, but ultimately it is the market's assessment of the firm's earnings potential that drives its valuation. The capitalised value of dividends is one method of determining the value of equity, but it is not the only factor that determines a firm's overall valuation.

The Valuation of a Firm Is Best Described as Depending