The correct answer is: D. MM Model
The MM Model, or Modigliani-Miller Model, is a financial model that assumes that the value of a company is not affected by its capital structure, i.e., the mix of debt and equity financing. This is because, according to the model, the market value of a company is determined by its expected future cash flows, and the cost of capital is determined by the risk of those cash flows. The MM Model assumes that the cost of debt and equity are constant, and that the tax rate is also constant.
The Net Income Approach is a method of valuation that uses a company’s net income as the basis for valuation. This approach assumes that a company’s net income is a good proxy for its future cash flows. However, this approach does not take into account the risk of a company’s cash flows, and it can be misleading for companies with high levels of debt.
The Net Operating Income Approach is a method of valuation that uses a company’s net operating income as the basis for valuation. This approach assumes that a company’s net operating income is a good proxy for its future cash flows, and it takes into account the risk of a company’s cash flows. However, this approach can be misleading for companies with high levels of debt, as it does not take into account the tax shield from debt.
The Traditional Approach is a method of valuation that uses a company’s book value as the basis for valuation. This approach assumes that a company’s book value is a good proxy for its future cash flows. However, this approach does not take into account the risk of a company’s cash flows, and it can be misleading for companies with high levels of intangible assets.