Which of the Following Statements Is FALSE

question 66

Multiple Choice

Which of the following statements is FALSE?

• A)Leverage decreases the risk of the equity of a firm.
• B)Because the cash flows of the debt and equity sum to the cash flows of the project,by the Law of One Price the combined values of debt and equity must be equal to the cash flows of the project.
• C)Franco Modigliani and Merton Miller argued that with perfect capital markets,the total value of a firm should not depend on its capital structure.
• D)It is inappropriate to discount the cash flows of levered equity at the same discount rate that we use for unlevered equity.

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Definitions:

Postconventional

A level of moral reasoning in Kohlberg's model where judgments are based on abstract principles and the value of all life.

Morality

Guidelines distinguishing between what is considered ethical and unethical or correct and incorrect actions.

Frontal Lobe

The part of the brain located in the front of the skull, responsible for complex cognitive functions, such as thinking, planning, problem-solving, and emotions.

Limbic System

A complex system of nerves and networks in the brain, involved in basic emotions (such as fear and pleasure), drives (such as those for food and sex), and the formation of memories.