Assuming risk neutrality and a zero discount rate,a firm's current share price can be expressed as:

Question

Quizplus · Accepted Answer

The correct formula for a firm's current share price, assuming risk neutrality and a zero discount rate, includes both the current operating value and the expected takeover premium multiplied by the takeover probability. This reflects the idea that the share price not only embodies the firm's current value but also the potential value added through a possible takeover, weighted by the likelihood of such an event occurring.

Assuming Risk Neutrality and a Zero Discount Rate,a Firm's Current ×\times×

Assuming Risk Neutrality and a Zero Discount Rate,a Firm's Current $\times$