Q.
1

Assertion (A): According to Net Income (NI) approach, capital structure decision is relevant in the valuation of firm.

Reason (R): A firm can change its total value and its overall cost of capital by change in the degree of leverage in its capital structure.

 

 

 

  • A

    Both (A) and (R) are correct and (R) is the right explanation of (A).

  • B

    Both (A) and (R) are correct and (R) is not the right explanation of (A).

  • C

    Both (A) and (R) are incorrect. 

  • D

    (A) is correct and (R) is not correct.