Which statement correctly describes the replacement cost method for determining

Question

Which statement correctly describes the replacement cost method for determining firm value? o The replacement cost method attempts to replace unspecified cash flows with realizable cash flows e The replacement cost method attempts to replace inefficient management with efficient management. cost method attempts to determine the cost of replacing negative NPV projects with postive NPV projects o The replacement cost method atempts to determine the cost of replacing assets, liabilities, and equity NEXT> BOOKMARK CLEAR

Explanation / Answer

Answer is last option (The replacement cost method attempts to determine the cost of replacing assets, liabilities and equity.)

Explanation;

As we know that replacement cost method attempts;

·        To determine the cost of replacing the company's assets.

·        To determine the cost of replacing the company's liabilities.

·        To determine the cost of replacing the company's equity.

Thus only last one option is correct answer.

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