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Under which of the following approaches cost of equity capital is...

This question belongs to Commerce Financial Management
Financial Management
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Under which of the following approaches cost of equity capital is assumed to be constant with the change in leverage?

Answer & Solution
Correct Answer: Option A
Net income approach of the following approaches cost of equity capital is assumed to be constant with the change in leverage. Net Income Approach suggests that value of the firm can be increased by decreasing the overall cost of capital (WACC) through higher debt proportion.
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