If you want to buy a business that is growing rapidly, what is the best valuation method to use to determine a fair price for it?
A) book value method
B) market-based approach
C) future earnings method
D) pay-back method

Question

Quizplus · Accepted Answer

When buying a rapidly growing business, the future earnings method is the most appropriate as it takes into account the potential future income streams and growth projections. It involves forecasting the company's future earnings and then calculating their present value using a discount rate. This method reflects the growth potential of the business and is more in line with the company's fair market value.

If You Want to Buy a Business That Is Growing