Net Income Theory of capital Structure

This lecture is delivered by Ms.Shaziya Naz, Asst. professor of biyani Girls College. The video is about Net income Theory of capital structure. Acc to this theory a firm can increase the value of the firm and reduce the overall cost of capital by increasing the proportion of debt capital in its capital structure to the maximum extent . Acc. To this theory value of the firm can be calculated by the following formula :

Total Value of the firm = Market value of Equity + Market value of Debt