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CHAPTER 2 ACCOUNTING UNDER IDEAL CONDITIONS

CHAPTER 2 ACCOUNTING UNDER IDEAL CONDITIONS

I assume risk-neutral investors in this Chapter, so that valuation of the firm is on the basis of expected present value, that is, no adjustment for risk is needed. The concept of a risk-averse investor is introduced in Section 3.4, and a capital asset pricing model of the firm’s shares is described in Section 4.5. 2. To Use the Present Value Model Under Ideal Conditions to Prepare an …