Which of the Following Statements Is FALSE

question 20

Multiple Choice

Which of the following statements is FALSE?

• A)The levered equity return equals the unlevered return,plus an extra "kick" due to leverage.
• B)By holding a portfolio of the firm's equity and its debt,we can replicate the cash flows from holding its levered equity.
• C)The cost of capital of levered equity is equal to the cost of capital of unlevered equity plus a premium that is proportional to the market value debt-equity ratio.
• D)If a firm is unlevered,all of the free cash flows generated by its assets are available to be paid out to its equity holders.

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Definitions:

Structured Analysis

A systematic method used in software engineering for converting specified requirements into detailed plans for software design.

Risk Event

An occurrence or situation that has the potential to adversely impact a project's objectives, timelines, or resources.

Known Risks

Risks that have been identified and analyzed, allowing for planned responses.

External Complexity

Refers to the conditions and variables outside an organization that affect its operations and success.