Financial Management - Study Mode
[#1121] Which of the following approaches advocates that the costs of equity capital and debt capital remain unaltered when the degree of leverage varies?
Correct Answer
(A) Net Income Approach
Explanation
Solution: Net Income Approach advocates that the costs of equity capital and debt capital remain unaltered when the degree of leverage varies. Net Income Approach suggests that value of the firm can be increased by decreasing the overall cost of capital (WACC) through higher debt proportion.
[#1122] Underlying all investments is the trade-off between_________.
Correct Answer
(D) expected return and risk
Explanation
Solution: Underlying all investments is the trade-off between expected return and risk. Risk simply means that the future actual return may vary from the expected return.
[#1123] While calculating weighted average cost of capital _________.
Correct Answer
(B) Cost of issue is considered
Explanation
Solution: While calculating weighted average cost of capital cost of issue is considered. Weighted average cost of capital ( WACC) is the average after-tax cost of a company's various capital sources used to finance the company.
[#1124] Mumbai stock exchange was recognized on a permanent basis in___________.
Correct Answer
(C) 1957
Explanation
Solution: On August 31, 1957, the BSE became the first stock exchange to be recognized by the Indian Government under the Securities Contracts Regulation Act.
[#1125] Over the Counter Exchange of India was started after the role model of_________.
Correct Answer
(C) NASDAQ& JASDAQ
Explanation
Solution: Over the counter exchange of India was started in 1992 after the role models of NASDAQ(national association of securities dealers automated quotation) and JASDAQ.