According to the abnormal earnings approach of equity valuation,investors willingly pay a premium for those firms that

A) earn less than the cost of equity capital.
B) produce negative abnormal earnings.
C) produce positive abnormal earnings.
D) earn an amount equal to the equity cost of capital.

Abnormal Earnings Approach

A method for valuing a company's worth based on the premise that stock prices are influenced by differences between the expected and actual earnings, adjusted for the cost of capital.

Equity Valuation

The process of determining the fair market value of a company's equity or shares.

Positive Abnormal Earnings

Earnings that exceed what is normally expected, based on historical trends or industry standards, often indicating superior performance.