. The formula of capitalisation method is


po4

Best Answer

Explanation:

  • The capitalization method is the method used to determine the value of the firm. 
  • The value of the firm is calculated by finding the net present value of the future cash flows of the firm. 
  • Sometimes the actual profits of the firm are less than the normal profits of the firm. So, we use the capitalization method to find out the value of the firm.
  • The formula of calculating capitalization:

po5

 Final answer:

Hence, the correct answer is option D: po5

 

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