Which of the Following Statements Is FALSE

question 50

Multiple Choice

Which of the following statements is FALSE?

• A)Since the publication of their original paper,Modigliani and Miller's ideas have greatly influenced finance research and practice.
• B)Proposition I was one of the first arguments to show that the Law of One Price could have strong implications for security prices and firm values in a competitive market;it marks the beginning of the modern theory of corporate finance.
• C)The conservation of value principle applies only to questions of debt versus equity or capital structure.
• D)The conservation of value principle for financial markets states that with perfect capital markets,financial transactions neither add nor destroy value,but instead represent a repackaging of risk (and therefore return).

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Definitions:

Fair Market Value

The price at which an asset would trade in a competitive auction setting.

Business Combination

A transaction or event in which an acquirer gains control over one or more businesses.

Consolidated Balance Sheet

A financial statement that presents the total assets, liabilities, and shareholders' equity of a parent company and its subsidiaries as one single entity.

Acquisition Differential

The variance between the purchase price of an acquisition and the fair value of the net assets that are distinctly recognized.