Question

The Traditional Approach to Value of the firm that?

Answer 1

Answer:

The traditional approach to capital structure suggests that there exists an optimal debt to equity ratio where the overall cost of capital is the minimum and the market value of the firm is the maximum. On either side of this point, changes in the financing mix can bring positive change to the value of the firm.

Step-by-step explanation:

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Answer 2

Answer:

The traditional approach towards the valuation of a company assumes: that the overall capitalization rate holds constant with changes in financial leverage. that there is an optimum capital structure. that total risk is not altered by changes in the capital structure.