Based on the premise of the capitalization of earning method, if a business for sale is low risk with good growth potential, the value will be based on which of the following?

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According to the capitalization of earnings method, the value of a business is determined by dividing the earnings (usually an average) by the capitalization rate. If the business is low risk and has good growth potential, investors will be willing to accept a lower rate of return (i.e. lower capitalization rate) and pay a higher multiple of earnings. Therefore, a low capitalization rate and a high earnings multiplier would be the best choice as they align with the characteristics of a low-risk, high-growth potential business.

Based on the Premise of the Capitalization of Earning Method