Which of the Following Statements Is FALSE

question 5

Multiple Choice

Which of the following statements is FALSE?

• A) 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.
• 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 unlevered.
• C) Although debt has a lower cost of capital than equity, leverage does not lower a firm's WACC.
• D) With no debt, the WACC is equal to the unlevered equity cost of capital.

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Definitions:

Services

Services involve non-tangible tasks performed for a fee, offering benefits, help, or satisfaction to customers without producing physical goods.

Account

An arrangement by which an individual or entity keeps track of their financial transactions and positions with another entity.

Accounting Records

Documents that businesses use to track their financial transactions and maintain financial accountability.

Journal

A record where all financial transactions are initially noted before they are posted to individual accounts in the ledger.