Which of the Following Statements Is/are Correct

question 21

Multiple Choice

Which of the following statements is/are correct?
I.Going-concern value of a firm is equal to the present value of expected net income.
II.When a buyer values a target firm,the appropriate discount rate is the buyer's weighted-average cost of capital.
III.The liquidation value estimate of terminal value usually vastly understates a healthy company's terminal value.
IV.The value of a firm's equity equals the discounted cash flow value of the firm minus all liabilities.

• A) II only
• B) III only
• C) I and II only
• D) II and III only
• E) II, III, and IV only
• F) None of the above.

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Definitions:

Market Price

The current price at which an asset or service can be bought or sold in a marketplace.

Competitive

A state of being in which entities vie against each other to achieve a goal, such as market dominance or winning a contest.

Profit-Maximizing

The process or strategy of adjusting operations and resources to achieve the highest possible profit.

Market Wage

The prevailing wage rate in a labor market for a given skill set, determined by supply and demand forces.