Final answer:
The market value of equity shows what investors think is the firm's value, reflecting their collective judgement and expectations of return through dividends or capital gains.
Step-by-step explanation:
The market value of equity is an objective measure that shows B. Investors think is the firm's value. This reflects the current market price of a company's shares multiplied by the total number of outstanding shares. It is based on the collective judgement of the investment community about what the company is worth, accounting for factors such as the company's financial performance, future prospects, and overall economic conditions.
When a company issues stock, investors buy with the expectation of receiving a return, which can be through dividends or capital gains. Equity is the market value of an asset minus any debts on it. For example, if the value of a house is $200,000 and the owner owes $180,000 to the bank, the owner's equity in the house is $20,000.