Which of the Following Statements Is FALSE

question 18

Multiple Choice

Which of the following statements is FALSE?

• A)Given a forecast of future interest payments,we can determine the interest tax shield and compute its present value by discounting it at a rate that corresponds to its risk.
• B)The total value of the unlevered firm exceeds the value of the firm with leverage due to the present value of the tax savings from debt.
• C)To compute the increase in the firm's total value associated with the interest tax shield,we need to forecast a firm's debt and its interest payments.
• D)There is an important tax advantage to the use of debt financing.

Grasp the purpose and content of the statement of cash flows and how it links to changes in a firm’s financial structure and investments.

Recognize the categories of activities detailed in the cash flow statement (operating, investing, and financing) and the type of transactions included in each.

Identify the difference between direct and indirect methods of reporting cash flows from operating activities.

Understand how changes in balance sheet accounts affect cash flows and figure into the cash flow statement.

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Definitions:

Business Organization

An entity formed for the purpose of carrying out commercial enterprise. Such organizations come in different forms including partnerships, corporations, and sole proprietorships.

Good Cause

A legally sufficient reason or justification for certain actions, decisions, or deviations from standard norms.

Terminate

To bring something to an end or conclusion, often referring to the cessation of contractual agreements or employment.

Specified Sales Quotas

Set amounts of sales that a salesperson or team is aimed to achieve within a certain time frame.