Market value is usually greater than book value because:
A)inflation drives market value above original costs.
B)inflation drives book value below original costs.
C)firms tend to invest in projects with very high book values.
D)the cost of capital drives market value up.

Question

Quizplus · Accepted Answer

Inflation drives up the prices of assets over time, resulting in market values that are higher than their original costs (book values). This is the primary reason why market values are usually greater than book values.

Market Value Is Usually Greater Than Book Value Because