Which of the Following Statements Is FALSE

question 61

Multiple Choice

Which of the following statements is FALSE?

• A)Once investors know the recap will occur,the share price will rise immediately to a level that reflects the value of the interest tax shield that the firm will receive from its recapitalization.
• B)When securities are fairly priced,the original shareholders of a firm capture the full benefit of the interest tax shield from an increase in leverage.
• C)In the presence of corporate taxes,we do not include the interest tax shield as one of the firm's assets on its market value balance sheet.
• D)We can analyze the recapitalization using the market value balance sheet;it states that the total market value of a firm's securities must equal the total market value of the firm's assets.

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Definitions:

Ad Hominem Fallacy

Rather than offering a counterargument, we target the character of the individual who presented the argument.

Earth is Flat

A debunked belief that the Earth is flat rather than an oblate spheroid.

Smells Funny

An informal expression indicating that something seems suspicious or not quite right.

Fallacy of Ambiguity

Debates featuring unclear expressions or careless linguistic constructions.