The correct answer is: B. traditional approach.
The traditional approach to valuation assumes that the market value of a firm is not affected by its capital structure. This is because the traditional approach assumes that investors are rational and will only pay a price for a firm that reflects its expected future cash flows. The amount of debt a firm has does not affect its expected future cash flows, so it does not affect its market value.
The net income approach to valuation is a method of valuing a firm that uses its net income as the starting point. The net income approach assumes that a firm’s value is equal to the present value of its future net income. The net operating income approach to valuation is a method of valuing a firm that uses its net operating income as the starting point. The net operating income approach assumes that a firm’s value is equal to the present value of its future net operating income.
The modern approach to valuation is a method of valuing a firm that uses its free cash flow as the starting point. The modern approach assumes that a firm’s value is equal to the present value of its future free cash flow.
In conclusion, the traditional approach to valuation assumes that the market value of a firm is not affected by its capital structure. This is because the traditional approach assumes that investors are rational and will only pay a price for a firm that reflects its expected future cash flows. The amount of debt a firm has does not affect its expected future cash flows, so it does not affect its market value.