18 Market Value and Book Value

Which of the following statements best explains why a company might have a market value of equity much greater than its book value of equity?

Select one:

a.

The company has performed very well in the past, achieving a high historical return on common equity

equityb.

All of the above

c.

Investors expect future growth in the companys earnings

d.

Investors expect the companys future return on common equity to be higher than the required return on equity