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.
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Question Can you describe what the production function for the game looks like? (How are labour, capital and resources combined? Are there constant, increasing or decreasing returns to scale?) Answer Discover Q & A Leading Solution Library Avail More Than 1412682 Solved problems, classrooms assignments, textbook's solutions, for quick Downloads No hassle, Instant Access Start Discovering 18,76,764 1930219 Asked 3,689 Active Tutors 1412682 Questions Answered Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!! Submit Assignment
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