Final answer:
The fair value of a property dividend is determined by the market value of the asset being distributed at the time of the dividend declaration, taking into account potential capital gains or future cash flows for the present discounted value.
Step-by-step explanation:
The fair value of a property dividend should be determined by referring to the market value of the asset that is being distributed. It is essential to establish an accurate and fair estimate of that value at the date of the dividend declaration. A property dividend, which is a non-cash dividend, may involve physical assets, stocks of other corporations, or any other type of asset. The market value should reflect what a knowledgeable, willing, and unpressured buyer would pay to a knowledgeable, willing, and unpressured seller in the market. In the context of property dividends, and as per financial theories, the present discounted value is also pertinent, especially when the asset being distributed has an inherent stream of future benefits, like potential capital gains or future cash flows. Deciding the discount rate to apply can be influenced by expected profits, future market conditions, and the expected rate of return consisting of dividends and capital gains.