List – I

List – II

a. M.M. Hypothesis without taxes


i. The cost of debt and cost of equity are assumed to be independent to the capital structure.
b. Net operating income approach


ii. In the absence of taxes a firm’s market value and the cost of capital remain invariant to the capital structure changes.
c. M.M. Hypothesis under corporate taxes iii. The cost of equity is assumed to increase linearly with leverage.
d. Net income approach iv. The value of the firm will increase with debt due to the deductibility of interest charges for tax computations and the value of the levered firm will be higher than the unlevered firm.
  • A

    a      b       c       d

    ii       iii      iv       i     

  • B

    ii       I       iv      iii

  • C

    i        ii        iii      iv

  • D

    iii      iv      i        ii