Describes net operating income approach to capital structure, Financial Management

Assignment Help:

Q. Describes Net Operating Income Approach to Capital Structure?

NOI (Net Operating Income Approach):- This is another speculation of capital structure which is propounded by 'Durand' and is just opposite to Net Income Approach. The real meaning of this approach is that the capital structure decision of a firm is irrelevant. Any alter in leverage will not lead to any change in total value of the firm. It signifies that the overall cost of capital would remain same whether the debt-equity mix is 50:50 or 30: 70 or 60:40. Therefore the total value of the firm the market price of shares and the overall cost of capital is independent of the degree of leverage.

Assumptions of NOI Approach:-

(i) The cost of debt is lesser than the cost of equity

(ii) There are no corporate or personal income taxes.

(iii)The business risk stays constant at every level of debt & equity.


Related Discussions:- Describes net operating income approach to capital structure

Who owns a credit union? explain, Who owns a credit union? Explain. Cr...

Who owns a credit union? Explain. Credit unions are owned by their members.  When credit union members place money in their credit union, they aren't technically "depositing"

Distinguish between diversifiable and non-diversifiable risk, Question: ...

Question: (a) An efficient financial market is assumed to hold under the Capital Asset Pricing Model (CAPM). What is the main hypothesis of an efficient financial market? (

Capital Asset Pricing Model , What is Capital Asset Pricing Model? Please ...

What is Capital Asset Pricing Model? Please provide me report on Capital Asset Pricing Model. It is about 2000 words count report on topic Capital Asset Pricing Model.

Securities and exchange commission (sec), SEC is the Regulatory body for...

SEC is the Regulatory body for investor protection in the United States which is created through the Securities Exchange Act of 1934.

Analyse the characteristics of good governance, Question 1: "Good Gover...

Question 1: "Good Governance is an ideal. To ensure sustainable development, actions must be taken to work towards this ideal with the aim of making it a reality." With ref

What is installment credit, Q. What is Installment Credit? This is anot...

Q. What is Installment Credit? This is another method by which the assets are purchased and the possession of goods is taken immediately but the payment is made in installments

Types of finance functions/ decisions, TYPES OF FINANCE FUNCTIONS/ DECISION...

TYPES OF FINANCE FUNCTIONS/ DECISIONS The most main decisions in finance relate to procuring funds, investing them in profitable projects or assets, operate for the year and a

Define where security returns are found less correlated, Security returns a...

Security returns are found to be less correlated across countries than within a country. Why can this be? Answer:  Security returns are less correlated possibly because countries

Operating cycle of company, calculate the operating cycle of company which ...

calculate the operating cycle of company which gives the following details relating to its operations. Particular raw material consumption per annum 842000. Annual cost of producti

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd