CFA Practice Question

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CFA Practice Question

The key problem with the excess earnings method is that there are too many subjective variables for the analyst to estimate. These estimated variables include:

I. The "normalized" income of the company.
II. The "normal" tangible assets of the company.
III. the "normal" return on tangible assets for the company.
IV. the capitalization rate for the excess earnings component of the company.
Correct Answer: I, II, III and IV

All of them are subjective variables of the EEM.

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