Which of the Following Statements Is FALSE

question 57

Multiple Choice

Which of the following statements is FALSE?

• A)The tradeoff theory weighs the costs of debt that result from shielding cash flows from taxes against the benefits from the effects of financial distress associated with leverage.
• B)Leverage has costs as well as benefits.
• C)According to the tradeoff theory,the total value of a levered firm equals the value of the firm without leverage plus the present value of the tax savings from debt,less the present value of financial distress costs.
• D)Firms have an incentive to increase leverage to exploit the tax benefits of debt.But with too much debt,they are more likely to risk default and incur financial distress costs.

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Definitions:

Ideology

A system of ideas and ideals, especially one that forms the basis of economic or political theory and policy.

Gender

A social construct relating to behaviors, roles, expectations, and activities that societies consider appropriate for men, women, and non-binary individuals.

Political Beliefs

The specific thoughts or ideas an individual holds regarding political ideologies, policies, and systems.

Religious Freedom

The right to practice any religion or none at all, without government interference or discrimination, a principle protected in many democratic societies.