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<p><strong>(a) Higher Equity is better,</strong></p> <p><strong>(b) Higher Debt is better,</strong></p> <p><strong>(c) Debt Ratio is irrelevant,</strong></p> <p><strong>(d) None of the above.</strong></p> <p> </p>
(a) Higher Equity is better,
b. higher debt is better.
Option B is correct.
Net Income Approach suggests that both the overall cost of capital, ko and the market value of the firm, V, are affected by the firm’s use of leverage.
(D) None of the above.
