Based on the Premise of the Capitalization of Earnings Method

question 8

Multiple Choice

Based on the premise of the capitalization of earnings method, if a business for sale is low risk with good growth potential, the value will be based on which of the following?

• A)A high capitalization rate and a low earnings multiplier.
• B)A low capitalization rate and a high earnings multiplier.
• C)A high capitalization rate and a high earnings multiplier.
• D)A low capitalization rate and a low earnings multiplier.

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Definitions:

Anti-inflation Policy

A set of governmental or central bank strategies aimed at controlling or reducing the rate of inflation in the economy.

Expectations

The anticipations or beliefs about future events or outcomes, which can influence current behavior and decision-making.

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The cost per barrel of crude oil as determined in global markets, influenced by factors such as supply, demand, geopolitical events, and market speculation.

Unemployment

Is the condition of someone actively looking for employment but unable to find work, often used as a key economic indicator.