Describe Net income approach
Briefly describe Net income approach? Named who recommended this theory?
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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.
Briefly explain the term Operating Leverage?
Question: To determine the real exchange rate, what two pieces of information do you need in addition to the nominal exchange rate? Answer: Q : Larger amount is actually purchased at Critically evaluate: “In comparing the two equilibrium positions, it note that a larger amount is actually purchased at a higher price. This disprove the law of demand.”
Critically evaluate: “In comparing the two equilibrium positions, it note that a larger amount is actually purchased at a higher price. This disprove the law of demand.”
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Describe the output effects of Inflation?
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