. The formula of capitalisation method is
- 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:
Hence, the correct answer is option D: