Which of the Following Statements Is FALSE

question 76

Multiple Choice

Which of the following statements is FALSE?

• A)The Law of One Price implies that leverage will affect the total value of the firm under perfect capital market conditions.
• B)In the absence of taxes or other transaction costs,the total cash flow paid out to all of a firm's security holders is equal to the total cash flow generated by the firm's assets.
• C)With perfect capital markets,leverage merely changes the allocation of cash flows between debt and equity,without altering the total cash flows of the firm.
• D)In a perfect capital market,the total value of a firm is equal to the market value of the total cash flows generated by its assets and is not affected by its choice of capital structure.

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Definitions:

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, widely used in finance to assess the risk of a financial instrument.

Probability Distribution

An analytical function detailing each potential outcome and its probability for a random variable within a set interval.

Variability

The extent to which data points in a dataset differ from each other and from the mean, often used in statistics.

Stand-Alone Basis

Evaluation or analysis of a project or company as if it were independent from its parent organization or any other entities.