Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Q. Describes Net Income Approach to Capital Structure?
Net Income Approach: - As-per to the Net Income Approach as suggested by Durand the capital structure decision is applicable for the valuation of the firm. Alternatively a change in the financial leverage (the ratio of debt to equity) will lead to a corresponding change in the value of the firm and the overall cost of capital.
As-per to this approach:
(i) If the ratio of debt to equity is raise the cost of capital will decline while the value of the firm and the market price of equity shares will increase.
(ii) A diminish in the ratio of debt to equity will cause an increase in the overall cost of capital and a decline both in the value of the firm and the market price of equity shares.
Therefore a firm can minimize the cost of capital and increase the value of the firm and market price of its equity shares by using debt financing to the maximum possible extent.
Assumptions: - Net Income Approach is on the basis of the following assumptions:
(i) The cost of debt is lesser than the cost of equity.
(ii) There are no corporate or else personal income taxes.
(iii) Use of debt doesn't change the risk perception of investors.
Accounting to Budget: Accounting to budget is a commonly used term to describe how an organisation controls its accounting process. Typically, an organisation divides its re
what is the criteria for a good international financial system
Talbot Enterprises recently reported an EBITDA of $8 million and net income of $2.4 million. It had $2.0 million of interest expense, and its corporate tax rate was 40%. What was i
Q. Computation of overall Cost of Capital? Computation of Value of the Firm (V) & Overall Cost of Capital when debt is lowered to Rs, 1, 00,000 When the debt is lowered to R
The main aim of securitization that was initiated in the late sixties was to resolve problems of mismatch and protect the US mortgage financing system from macroe
Explain in detail about the Cost of Capital Every type of capital used by the firm (preference shares, debt and equity) must be incorporated into the cost of capital, with rela
Issuance of securities : Security issues by companies are a novel and common way of raising funds that in turn help realize their growth aspirations. It is therefore necessary
What problems can take place into the capital budgeting analysis if project debt is evaluated in place of the borrowing capacity created by the project? If project debt is grea
1.How would you judge the potential profit of Bajaj Electronics on the first year of sales to Booth Plastics and give your views to increase the profit? 2. Suggestion regarding C
Evaluate the firm’s financial standing for the past 5 years: • Undertake a financial and strategic analysis of its performance: o Use the Assignment Questions for guidance ON
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!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd