--%>

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 : Who will get the goods and services Who

    Who will get the goods and services?

  • Q : Symptoms of governmental interference-

    Adam Smith and the “typical liberal” economists who followed within his footsteps viewed persistent monopolization and market power as: (1) ineffective and best regulated through government. (2) crucial in finding the rate of technological

  • Q : Introduction of the term net present

    Give a brief introduction of the term net present value? Write down its admittable rules, their merits and demerits?

  • Q : Illustrate Measuring unemployment

    Illustrate Measuring unemployment?

  • Q : Different types of leverages in

    Write down the different types of leverages which are computed for financial analysis?

  • Q : Marketing in action Which of the

    Which of the following are examples of public goods?

  • Q : Technology in production Drawing a

    Drawing a production possibilities frontier needs the supposition that: (1) Decision makers encompass discretion over resource accessibility. (2) Technology is constant. (3) Income is fairly distributed. (4) Resources are considerably diverse. (5) At least three goods

  • Q : What are the Functions of money Explain

    Explain in short the functions of money? Answer: (A) Medium of exchange: Money can be employed to make payments for all transactions of services and goods.

  • Q : Fiscal Policy Fiscal Policy : Public or

    Fiscal Policy:Public or government finance is a field of economics. This deals with budgeting the revenues and expenditures of government (i.e., or public sector). It is regarding the identi

  • 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