Which of the Following Statements Is FALSE

question 24

Multiple Choice

Which of the following statements is FALSE?

• A)In general,the gain to investors from the tax deductibility of interest payments is referred to as the interest tax shield.
• B)The interest tax shield is the additional amount that a firm would have paid in taxes if it did not have leverage.
• C)Because corporations pay taxes on their profits after interest payments are deducted,interest expenses reduce the amount of corporate tax firms must pay.
• D)As Modigliani and Miller made clear in their original work,capital structure matters in perfect capital markets.Thus,if capital structure does not matter,then it must stem from a market imperfection.

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Definitions:

Temperament Traits

Characteristics that determine an individual's typical responses to the environment, often considered innate or biologically based.

Emotional Behavior

Actions and reactions that are influenced by and express one's emotions, which can affect interpersonal relationships and decision-making processes.

Motivation

The psychological drive or force that initiates, guides, and maintains goal-oriented behaviors.

Factor Analysis

A statistical method used to identify underlying variables, or factors, that explain the pattern of correlations within a set of observed variables.