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In case of Net Income Approach, the Cost of equity is?

a- Constant

b- Increasing

c- Decreasing

d- None of the above

 

 

 

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Question ajoutée par Divyesh Patel , Assistant Professional Officer- Treasury , City Of Cape Town
Date de publication: 2015/01/15
Sahar Alech
par Sahar Alech , Auditor / Financial Manager , Accounting Services Office

Cost of equity remains constant

georgei assi
par georgei assi , مدير حسابات , المجموعة السورية

The correct answer is A

VENKITARAMAN KRISHNA MOORTHY VRINDAVAN
par VENKITARAMAN KRISHNA MOORTHY VRINDAVAN , Project Execution Manager & Accounts Manager , ALI INTERNATIONAL TRADING EST.

Option (a)  >>>>>>>>>  Cost of equity is  Constant.

Alex Al Yazouri
par Alex Al Yazouri , General Manager , Al Mushref Cooperative Society

a- Constant

Mir Mujtaba Ali
par Mir Mujtaba Ali , Internal Audit Manager , Confidential

a

ايمن محمد عاطف محمد
par ايمن محمد عاطف محمد , Director of the control and regulation unit , ACOLID

A

Net income approach suggested by the Durand. According to this approach, the capital structure decision is relevant to the valuation of the firm. In other words, a change in the capital structure leads to a corresponding change in the overall cost of capital as well as the total value of the firm.

 

According to this approach, use more debt finance to reduce the overall cost of capital and increase the value of firm.

 

Net income approach is based on the following three important assumptions:

 

1. There are no corporate taxes.

 

2. The cost debt is less than the cost of equity.

 

3. The use of debt does not change the risk perception of the investor.

Utilisateur supprimé
par Utilisateur supprimé

a- Constant

 

Thank you

Waqas Raza Khan
par Waqas Raza Khan , Accountant , Cold Store Group of Saudi Arabia

A----------Remain Constant

Michael Pawa
par Michael Pawa , cashier , sharjah cooperative society

Answer is A.cost of equity is fixed and continuous

Jijumon James
par Jijumon James , SENIOR ACCOUNTANT , BADR AL SAMAA HOSPITAL

Answer is A

Utilisateur supprimé
par Utilisateur supprimé

option

a- Constant

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