-The cost of capital declines when the degree of financial leverage increases- Who advocated it-Net operating income approachNet income approachModigliani-Miller approachTraditional approach

Question

Toppr Admin · Accepted Answer

According to Net income Approach the capital structure decision is relevant to valuation of the firm- This means that a change in financial leverage will automatically lead to corresponding change in overall cost of the capital as well as the total value of the firm- Hence- if the financial leverage increases the weighted average cost of capital decreases and the value of firm and market price of equity share increases and vice versa-xA0-

List-I	List-II
(a) Modigliani-Miller approach	$1.$ Commercial paper
(b) Net Operating income approach	$2.$ Working capital
(c) Short-term money market instrument	$3.$ Capital structure
(d) Factoring	$4.$ Arbitrage

"The cost of capital declines when the degree of financial leverage increases." Who advocated it?Net operating income approachNet income approachModigliani-Miller approachTraditional approach

"The cost of capital declines when the degree of financial leverage increases." Who advocated it?
Net operating income approach
Net income approach
Modigliani-Miller approach
Traditional approach