a) Compute the market value of the firm and cost of capital of all the three cases and comment under traditional approach: Net operating income - Rs. 100000
Case A- When the firm uses no debt-- Equity capitalization rate is 10%.
Case B- When the firm uses Rs. 250000, 6%, debentures- Equity capitalization rate is 11%.
Case C- When the firm uses Rs. 400000, 7%, debentures- Equity capitalization rate is 13\% .
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case b is the correct answer
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