Which of the Following Statements Is FALSE

question 28

Multiple Choice

Which of the following statements is FALSE?

• A)Modigliani and Miller's conclusion verified the common view,which stated that even with perfect capital markets,leverage would affect a firm's value.
• B)We can evaluate the relationship between risk and return more formally by computing the sensitivity of each security's return to the systematic risk of the economy.
• C)Investors in levered equity require a higher expected return to compensate for its increased risk.
• D)Leverage increases the risk of equity even when there is no risk that the firm will default.

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Definitions:

Operational Plans

Operational plans are detailed, short-term plans that outline how to achieve the goals and objectives set out in strategic plans, focusing on daily operations and logistics.

Tactical Plans

Short-term actions and strategies that are designed to implement and achieve parts of a strategic plan.