Which of the Following Statements Regarding Recapitalizations Is FALSE

question 43

Multiple Choice

Which of the following statements regarding recapitalizations is FALSE?

• A)With a recapitalization,even though leverage reduces the total value of equity,shareholders capture the benefits of the interest tax shield up front.
• B)The share price always rises after the completion of the recapitalization.
• C)Leveraged recaps were especially popular in the mid- to late-1980s,when many firms found that these transactions could reduce their tax payments.
• D)When a firm makes a significant change to its capital structure,the transaction is called a recapitalization.

---

Definitions:

Landrum-Griffin Act

United States federal legislation that regulates labor unions, addressing their governance, financial practices, and the rights of union members.

Protected Class

Groups of people who are legally protected from discrimination on the basis of characteristics such as race, gender, age, disability, and sexual orientation.

Title VII

The section of the Civil Rights Act of 1964 that prohibits employment discrimination based on race, color, religion, sex, or national origin.

Civil Rights Act

A landmark piece of U.S. legislation passed in 1964 aimed at ending discrimination based on race, color, religion, sex, or national origin.