Which of the Following Statements Is FALSE

question 34

Multiple Choice

Which of the following statements is FALSE?

• A)The equity cost of capital for a stock is the expected return of other investments available in the market with equivalent risk to the firm's shares.
• B)The price of a share of stock is equal to the present value of the expected future dividends it will pay.
• C)If the current stock price were less than P0 = ,it would be a negative NPV investment,and we would expect investors to rush in and sell it,driving down the stock's price.
• D)The law of one price implies that to value any security,we must determine the expected cash flows an investor will receive from owning it.

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Definitions:

Bounded Rationality

The concept that individuals make decisions based on the limited information available to them and their finite capacity to process information.

Managers

An advocate for stability and the status quo.

Conception of the World

An individual or collective understanding and interpretation of the world around us, including beliefs about nature, society, and the universe.

Satisfice

To select the first alternative that is “good enough,” because the costs in time and effort are too great to optimize.