Under which of the following approaches cost of equity capital is assumed to be constant with the change in leverage?

A Net income approach
B Modigliani and Miller approach
C Net operating income approach
D Traditional approach

Correct Answer: Net income approach

Net income approach of the following approaches cost of equity capital is assumed to be constant with the change in leverage. Net Income Approach suggests that value of the firm can be increased by decreasing the overall cost of capital (WACC) through higher debt proportion.
Bissoy MCQ
#Commerce #Financial Management

Related Questions

Which of the following approaches advocates that the costs of equity capital and debt capital remain unaltered when the degree of leverage varies?
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