Which of the following refers to income capitalization?
A. Regular and systematic reduction in income that transfers asset value to expense over time.
B. Dividing projected net income excluding depreciation, interest, and owner draws, by the best return that you could expect to obtain in other investments.
C. Multiplying your estimate of future earnings by the net income to equity ratio.
D. The amount of profit earned by a business before calculating the amount of income tax owed.
Answer: B