[amp_mcq option1=”Traditional Approach” option2=”MM Model” option3=”Net Income Approach” option4=”Net Operating Income Approach” correct=”option1″]<\/p>\n
The correct answer is: A. Traditional Approach<\/p>\n
The traditional approach to capital structure assumes that personal leverage can replace corporate leverage. This means that shareholders can use their own personal debt to finance their investment in a company, and that this will have the same effect as the company using corporate debt.<\/p>\n
The MM Model, on the other hand, assumes that there is no tax advantage to debt financing. This means that shareholders cannot use their own personal debt to finance their investment in a company, and that the company must use corporate debt if it wants to benefit from the tax advantage of debt financing.<\/p>\n
The Net Income Approach and the Net Operating Income Approach are both methods of calculating a company’s value. The Net Income Approach calculates a company’s value based on its net income, while the Net Operating Income Approach calculates a company’s value based on its net operating income.<\/p>\n
Neither of these approaches assumes that personal leverage can replace corporate leverage.<\/p>\n","protected":false},"excerpt":{"rendered":"
[amp_mcq option1=”Traditional Approach” option2=”MM Model” option3=”Net Income Approach” option4=”Net Operating Income Approach” correct=”option1″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"class_list":["post-52844","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"\n