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Valuing an entire company, an operating division of that company or its ownership shares involves three...

Valuing an entire company, an operating division of that company or its ownership shares involves three basic steps. These steps include all of the following except:

Multiple Choice

  • Forecasting future amounts of a value-relevant attribute.

  • Determining the discounted present value of the expected future amounts using an appropriate discount rate.

  • Determining the risk or uncertainty associated with the forecasted future amounts.

  • Determining the dividends the company will pay in the future based on the company’s dividend policy and expected future earnings.

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ReportAnswer #1

Your required answer is option D i.e. Determining the dividends the company will pay in the future based on the company’s dividend policy and expected future earnings

Explanation:

When a company is valued that operating division of that company or its ownership shares then there are three basic stepts to value that company

1. Forecasting future amounts of a value-relevant attribute

2. Determining the discounted present value of the expected future amounts using an appropriate discount rate

3. Determining the risk or uncertainty associated with the forecasted future amounts.

While making valuation they do not more focus on comapny's dividends policy and expected dividends in futures since that will not help to determine the future or present value of the company.

I hope this clear your doubt.

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