Overall Cost of Capital/Capitalisation Rate (ko) is Constant

The NOI Approach to valuation argues that the overall capitalization rate of the firm constant, for all degrees of leverage. The value of the firm, given the level of EBIT, is determined by Eq. 15.13


In other words, the market evaluates the firm as a whole. The split of the capitalization between debt and equity is, therefore, not significant.

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