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Analyze the approaches to capital structure decisions and determine which theory is the most applicable across the widest number of scenarios.

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Analyze the approaches to capital structure decisions and determine which theory is the most applicable across the widest number of scenarios.

The first approach to capital structure decisions is the net income approach according to which the cost of debt and the cost of equity do not change with a change in leverage ratio. The second approach is the net operating income approach according to which the firm and the weighted average cost of capital are independent of the firm's capital structure. This ...

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