Which of the following methods of valuation takes the earnings (net profit) of an organization, and subtracts or adds in any unusual items that an investor feels are not customary?

Question

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Capitalization of earnings valuation is achieved by taking the earnings (net profit) of an organization; subtracting or adding any unusual items that the lender or investor feels are not customary, normal, or usual items; and dividing that figure by a capitalization rate.

Which of the Following Methods of Valuation Takes the Earnings