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- This approach is an intermediate model, compromising between the net income approach and the net operating income approach.
- This approach assumes an optimal capital structure where the WACC is minimized and the value of the firm is maximized.
- The model suggests that up to a certain level of leverage, the use of debt financing reduces the WACC, but after that optimal level, the WACC escalates depressing the firm value.
Which capital structure theory model is defined above?