Which of the Following Statements Is FALSE

question 36

Multiple Choice

Which of the following statements is FALSE?

• A)With no debt,the WACC is equal to the unlevered equity cost of capital.
• B)With perfect capital markets,a firm's WACC is dependent on its capital structure and is equal to its equity cost of capital only if the firm is levered.
• C)As the firm borrows at the low cost of capital for debt,its equity cost of capital rises,but the net effect is that the firm's WACC is unchanged.
• D)Although debt has a lower cost of capital than equity,leverage does not lower a firm's WACC.

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Definitions:

Bankruptcy

A legal process through which individuals or entities unable to meet their financial obligations can seek relief from some or all of their debts.

Do Not Track

A preference that users can set in their web browsers to inform websites they do not want their activities tracked for advertising purposes.

Internet Browsers

Software applications used to access, retrieve, and view information on the World Wide Web, including websites, videos, and images.

Unfair Practice

Deceptive, fraudulent, or unethical conduct by a business that misleads consumers or prevents competitors from playing on a level playing field.