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

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

Related Questions

Under which of the following approaches, the cost of equity is assumed to increase linearly with leverage, i.e, the average cost of capital remains constant with increased use of leverage?  1. Net Operating Income Approach 2. Net Income Approach 3. Traditional Approach 4. Walter Approach
Assertion (A): Arbitrage keeps the cost of capital constant despite change in the capital structure.
Reason (R): It ensures compensating inverse change in cost of equity capital with a change in the cost of debt capital.
Which of the following approaches advocates that the costs of equity capital and debt capital remain unaltered when the degree of leverage varies?
Assertion A): According to Net Income (NI) approach, capital structure decision is relevant in the valuation of firm. Reason R): A firm can change its total value and its overall cost of capital by change in the degree of leverage in its capital structure. In the context of the above two statements, which one of the following options is correct?
Seven chocolates, A, B, C, D, E, F and G, are bought at different costs between Rs. 40 and Rs. 50 (excluding both Rs. 40 and Rs. 50) but not necessarily in the same order. The cost of chocolate C is Rs. 5 less than that of chocolate E. The cost of chocolate A is a prime number. The cost of chocolate F is Rs. 2 more than that of chocolate A. The cost of chocolate F is more than that of chocolate E. The cost of chocolate D is an odd number. The cost of chocolate G is Rs. 3 more than the cost of chocolate D. None of the chocolates cost Rs. 44. The cost of chocolate B is an even number. What is the cost of chocolate E?
A passage is given with five questions following it. Read the passage carefully and select the best answer to each question out of the given fouralternatives. Teaching about compassion and empathy in schools can help deal with problems of climate change and environmental degradation,” says Barbara Maas, secretary,
Standing Committee for Environment and Conservation, International Buddhist Confederation (IBC). She was in New Delhi to participate in the IBCs governing
council meeting, December 10-11, 2017. “We started an awareness campaign in the year 2005-2006 with H H The Dalai Lama when we learnt that tiger skins were
being traded in China and Tibet. At that time, I was not a Buddhist; I wrote to the Dalai Lama asking him to say that this is harmful and he wrote back to say, “We
will stop this.” He used very strong words during the Kalachakra in 2006, when he said, If he sees people wearing fur and skins, he doesnt feel like living. This sent
huge shock waves in the Himalayan community. Within six months, in Lhasa, people ripped the fur trim of their tubba, the traditional Tibetan dress. The messenger was ideal and the audience was receptive,” says Maas who is a conservationist. She has studied the battered foxs behavioral ecology in Serengeti,Africa. She heads the endangered species conservation at the Nature and Biodiversity Conservation Union (NABU) International Foundation for Nature, Berlin. “I metSamdhong Rinpoche, The Karmapa, HH the Dalai Lama and Geshe Lhakdor and I thought, if by being a Buddhist, you become like this, I am going for it, “says Maas, who led the IBC initiative for including the Buddhist perspective to the global discourse on climate change by presenting the statement, The Time to Act is Now: aBuddhist Declaration on Climate Change, at COP21 in Paris. “It was for the first time in the history of Buddhism that leaders of different sanghas came together to take a stand on anything! The statement lists a couple ofimportant things: the first is that we amass things that we dont need; there is overpopulation; we need to live with contentment and deal with each other and theenvironment with love and compassion,” elaborates Maas. She is an ardent advocate of a vegan diet because “consuming meat and milk globally contributes more toclimate change than all "transport in the world.” Turning vegetarian or vegan usually requires complete change of perspective before one gives up eating their favorite food. What are the Buddhist ways to bringabout this kind of change at the individual level? “To change our behavior, Buddhism is an ideal vehicle; it made me a more contented person,” says Maas, who grewup in Germany, as a sausage chomping, meat-loving individual. She says, “If I can change, so can anybody”. Why did Ms. Barbara Mass say “If I can change, so can anybody”?
When labour is plotted on X-axis and capital is plotted on Y-axis and an iso-quant is prepared, then which of the following statements is/are false ? (a) Marginal rate of technical substitution of labour for capital is equal to the slope of the iso-quant. (b) Marginal rate of technical substitution of labour for capital is equal to change in the units of capital divided by the change in the units of labour. (c) Marginal rate of technical substitution of labour for capital is the ratio of marginal productivity of capital to marginal productivity of labour.
When labour is plotted on X-axis and capital is plotted on Y-axis and an isoquant is prepared, then which of the following statement(s) is/arefalse?
1. Marginal rate of technical substitution of labour for capital is equal to the slope of the iso-quant.
2. Marginal rate of technical substitution of labour for capital is equal to change in the units of capital divided by the change in the units of labour.
3. Marginal rate of technical substitution of labour for capital is the ratio of marginal productivity of capital to marginal productivity of labour.
If out of net annual income of the year Rs. 42,000 the preference dividend and equity dividend paid are Rs. 7,000 and Rs. 24,000 respectively, and total equity capital be Rs. 1,40,000 the return on equity capital will be:
The cost of packaging of the mangoes is 40% the cost of fresh mangoes themselves. The cost of mangoes increased by 30% but the cost of packaging decreased by 50%, then the percentage change of the cost of packed mangoes, if the cost of packed mangoes is equal to the sum of the cost of fresh mangoes and cost of packaging :