--%>
Assignment Help - homework help

Describe Net income approach

Briefly describe Net income approach? Named who recommended this theory?

E

Expert

Verified

Net income (or NI) approach as this is as well termed as traditional approach. This is an approach in that both, equity and cost of debt are independent of capital structure. The constituents that are involved in it are steady and don’t depend on how much debt the firm is using. This theory was recommended by David Durand. In this alter in financial leverage leads to alter in entire cost of capital as well as whole value of firm. If financial leverage rises, weighted average cost reduces and value of firm and market price of equity raises. If this reduces then weighted average cost of capital raises and value of firm and market price of equity reduces. The suppositions that can be made according to this approach is that there are no taxes involved in this and the employ of debt does not alter the risk factor for the investors and will continue the same throughout.

   Related Questions in Business Economics

  • Q : Describe Spillovers and externalities

    Describe Spillovers and externalities?

    		•
  • Q : Main advantage of EVA The main

    The main advantage of using EVA is that it is simple to calculate and understand. It uses simple measures like operating profits and cost of capital terms which are widely known and accepted in the financial arena. It helps the managers to assess thei

    		•
  • Q : Cornerstone of typical economic theory

    The cornerstone of typical economic theory derived through the work of Jeremy Bentham was the perception of (i) the wages fund. (ii) natural checks on population. (iii) increasing cost. (iv) utility. (v) surplus value.

    Q : Theory of Purchasing Power Parity

    Question: The Theory of Purchasing Power Parity says that, in the long run, nominal exchange rates change to offset changes in relative i. _________________________ so that the purchasing power of two currencies st

    		•
  • Q : What are the dependencies in U.S. and

    What are the dependencies in U.S. and World Trade?

    		•
  • Q : Use of human and material resources

    What are the merits of speciality in the use of human and material resources?

    		•
  • Q : Problem regarding to intermediaries and

    Society gains from the activities of intermediaries which succeed within: (1) falling uncertainty and transaction costs for last consumers. (2) arbitrating strikes and defending workers’ rights. (3) creating productive jobs for unskilled workers

    		•
  • Q : Describe the term-Only to be part with

    Describe the term: “Only to be part with it we want money”?

    		•
  • Q : Discuss the economic aspects of ticket

    Discuss the economic aspects of ticket scalping also identifying the gainers and losers?

    		•
  • Q : Individual sellers and buyers in

    Both individual sellers and buyers within perfect competition: w) can affect the market price through their own individual actions. x) can affect the market price by joining along with some of their competitors.  y) have to take the market price as a specified. z

    		•