Bissoy.com
Doctors Medicines MCQs Q&A

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

Which of the following approaches advocates that the costs of equity capital and debt capital remain unaltered when the degree of leverage varies? Correct Answer Net Income Approach

Net Income Approach advocates that the costs of equity capital and debt capital remain unaltered when the degree of leverage varies. 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

Let D be a simple graph on 10 vertices such that there is a vertex of degree 1, a vertex of degree 2, a vertex of degree 3, a vertex of degree 4, a vertex of degree 5, a vertex of degree 6, a vertex of degree 7, a vertex of degree 8 and a vertex of degree 9. What can be the degree of the last vertex?
Which of the following is/are false regarding capital structure theory as stated by Miller and Modigliani?
1) If agency costs are considered, the expected agency costs increases as the debt-equity ratio decreases.
2) With the given assumptions, there is no optimal capital structure.
3) In the presence of taxes, the market value of the firm decreases by the tax shield of debt
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
Study the following statements.i) The displacement method is more useful when degree of kinematic indeterminacy is greater than the degree of static indeterminacy.ii) The displacement method is more useful when degree of kinematic indeterminacy is less than the degree of static indeterminacy.iii) The force method is more useful when degree of static indeterminacy is greater than the degree of kinematic indeterminacy.iv) The force method is more useful when degree of static indeterminacy is less than the degree of kinematic indeterminacy.The correct answer is
Three statements are given, followed by four conclusions numbered I, Il, Ill and IV. Assuming the statements to be true, even if they seem to be at variance with commonly known facts, decide which of the conclusions logically follow(s) from the statements. Statements: Some advocates are doctors. Some doctors are players. All players are engineers. Conclusions: I. Some players are doctors. Il. Some engineers are advocates. Ill. All advocates are engineers. IV. Some engineers are doctors.
The union cabinet has approved ₹6,000 cr equity infusion in NIIF’s debt platform over the current and the next fiscal. NIIF will leverage this equity to raise ₹1.1 trillion over the next how many years to finance infrastructure projects.
The question given below consists of a statement, followed by three arguments numbered I, II and III. You have to decide which of the arguments is/are ‘strong’ arguments and which is/are ‘weak’ arguments and accordingly choose your answer from the alternatives given below each question. Statement: Malaysia has set up a trust fund for the public to donate money in order to help the government repay the country's debt. Malaysia's Finance Ministry said the fund would be called Malaysia Hope Fund and the contributions must be made in cash. Will this help to gain financial stability? Arguments: I. Yes, Malaysia's national debt amounts to $250.8 billion which is 80% of its GDP. II. No, Malaysia's debt amounts to $250.8 billion which is 8% of its national GDP. III. Yes, 80% of Malaysia's GDP amounts to a debt amount of about $250.8 billion.
Assertion (A): Only the relevant costs should be taken into consideration for decision-making.
Reason (R): All variable costs are relevant costs, and all fixed costs are irrelevant costs.
The 4 costs of quality are external failure costs, internal failure costs, assurance costs and . . . . . . . . costs.
The rear window of an automobile is made of thick glass i.e. AB = 5 mm and thermal conductivity is 0.8 W/m degree. To defrost this window, a thin transparent film type heating element has been fixed to its inner surface. For the conditions given below, determine the electric power that must be provided per unit area of window if a temperature 5 degree Celsius is maintained at its outer surface. Interior air temperature and the corresponding surface coefficient are 20 degree Celsius and 12 W/m2 degree. Surrounding air temperature and the corresponding surface coefficient are – 15 degree Celsius and 70 W/m2 degree. Electric heater provides uniform heat flux