When consistent assumptions are used,we
A)get the same value for equity under the enterprise and equity methods of valuation
B)we get a higher value of equity under the equity method of valuation
C)we get a lower value of equity under the equity method of valuation
D)we get equity values that cannot be compared across the equity and enterprise methods of valuation

Question

Quizplus · Accepted Answer

When consistent assumptions are used, the value of equity calculated under the enterprise method and equity method of valuation should be the same. This is because both methods are ultimately trying to ascribe a value to the same thing - the equity portion of the company's capital structure. Therefore, if the same assumptions are used in both methods, the value of equity derived should be the same.

When Consistent Assumptions Are Used,we