In which of the approach, the market value of the firm depends upon the EBIT and the overall cost of…
Under David Durand's Net Operating Income (NOI) Approach to capital structure, the total market value of the firm (V) is determined solely by capitalizing its Net Operating…
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In which of the approach, the market value of the firm depends upon the EBIT and the overall cost of capital
Answer and explanation
Correct answer B
Under David Durand's Net Operating Income (NOI) Approach to capital structure, the total market value of the firm (V) is determined solely by capitalizing its Net Operating Income (EBIT) at the constant overall cost of capital (Ko), i.e., V = EBIT / Ko, making firm value independent of financial leverage.
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UGC NET Management