Q. Problem in the determine of cost of the capital?
Conceptual controversies regarding the relationship between the cost of the capital and the capital structure: different theories have been propounded by the different authors explaining the relationship between the capital structure, cost of the capital and the value of the firm. This has resulted into various concepts difficulties. According to the net income approach and the traditional theories both the cost of capital and as well as the value of the firm. This has resulted into various concept difficulties. According to the net income approach and the traditional theories both the cost of capital and as well as the value of the firm have a direct relationship to the method and the level of the financial. in the opinion a firm can be minimize the weighted average cost of the capital and increased the value of the firm by using the debts financing . On the other hand, net operational income and Modigliani and miller approach prove that the cost of capital is not affected by the change in the working capital or say that the debts equity mix is irrelevant in determination in the cost of capital and value of a firm.