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According to Net Operating Income (NOI) Approach:
AWACC decreases linearly with debt
BWACC is independent of capital structure
CWACC increases with debt
DCapital structure is the most important decision
Answer & Solution
Correct answer: B. WACC is independent of capital structure
1. NOI Approach: market capitalises EBIT at a single rate (Ko) regardless of leverage.
2. WACC is constant.
3. Capital structure is irrelevant under NOI assumptions.
_Source: ICAI BoS CA Inter Paper 6A, Ch 5 "Financing Decisions — Capital Structure", §2.3_