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:

Observable

Capable of being seen, noticed, or measured directly or indirectly in a scientific or empirical manner.

Classical Conditioning

A learning process that occurs when two stimuli are repeatedly paired; a response that is at first elicited by the second stimulus is eventually elicited by the first stimulus alone.

Stimulus-Response Association

The link established between a specific stimulus and a particular response through conditioning.

Extinction

In behavioral psychology, the gradual weakening and eventual disappearance of a learned response, typically as a result of the withdrawal of reinforcement.