Final answer:
The NI Approach and MM Model with Taxes both argue that leveraging can increase a firm's value, while the NOI Approach does not make this claim. Therefore, the correct answer that asserts a higher value for levered firms over unlevered firms is 'Both A and C'.
Step-by-step explanation:
The theories in question deal with the impact of leverage (i.e., the use of debt) on a firm's value. The Net Income (NI) Approach posits that leverage can increase a firm's value by decreasing the overall cost of capital through the use of cheaper debt. Yet, it's the Modigliani-Miller Proposition (MM Model) with Taxes that specifically argues a levered firm is worth more than an unlevered firm due to the tax shield on interest payments.
Under the MM proposition with taxes, the interest tax shields provided by debt can result in a higher total value for the firm compared to if it were fully financed by equity. This is because corporate income taxes typically allow interest to be deducted, which saves on taxes and effectively reduces the cost of borrowing.
Conversely, the Net Operating Income (NOI) Approach proposes that the market capitalizes the firm’s overall earnings to determine its value, irrespective of its capital structure. Hence, the correct answer that supports the view that leveraged firms have higher value is Both A and C.