Which of the Following Statements Is FALSE

question 66

Multiple Choice

Which of the following statements is FALSE?

• A) The value of the firm is determined by the present value (PV) of the cash flows from its current and future investments.
• B) When investors use leverage in their own portfolios to adjust the leverage choice made by the firm, we say that they are using homemade leverage.
• C) As long as investors can borrow or lend at the same interest rate as the firm, homemade leverage is a perfect substitute for the use of leverage by the firm.
• D) The investor can re-create the payoffs of unlevered equity by borrowing and using the proceeds to purchase the equity of the firm.

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Definitions:

Bureaucracy

A type of formal organization characterized by an authority hierarchy, a clear division of labor, explicit rules, and impersonality.

College

An institution of higher education offering undergraduate degrees; often a part of a larger university.

Criterion

A standard or principle by which something may be judged or decided, often used in assessments or decision-making processes.

Expressive Needs

Emotional or social needs that involve seeking emotional support, love, belonging, and self-expression.