The capitalization rate when figuring goodwill should be a figure assigned to show ______.
A) risk and expected growth rate of future earnings
B) risk and profit minus taxes
C) expected growth rate and profit
D) expected growth rate and the value of tangible assets

Question

Quizplus · Accepted Answer

The capitalization rate used in calculating goodwill reflects the risk and expected growth rate of future earnings. This rate helps in determining the present value of the expected future earnings, which is crucial in calculating goodwill.

The Capitalization Rate When Figuring Goodwill Should Be a Figure