Which of the Following Statements Is FALSE

question 3

Multiple Choice

Which of the following statements is FALSE?

• A) By holding a portfolio of the firm's equity and its debt, we can replicate the cash flows from holding its levered equity.
• B) The levered equity return equals the unlevered return, plus an extra "kick" due to leverage.
• C) If a firm is unlevered, all of the free cash flows generated by its assets are available to be paid out to its equity holders.
• D) The cost of capital of levered equity is equal to the cost of capital of unlevered equity plus a premium that is proportional to the market value debt-equity ratio.

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Definitions:

Clinical Syndrome

A combination of symptoms and signs that together represent a disease or disorder.

DSM

The Diagnostic and Statistical Manual of Mental Disorders, a handbook used by healthcare professionals as the authoritative guide to the diagnosis of mental disorders.

Emil Kraepelin

A German psychiatrist who made significant contributions to the classification of mental disorders and is considered a founding figure of modern psychiatry.

Diagnostic and Statistical Manual

A publication by the American Psychiatric Association that provides a common language and standard criteria for the classification of mental disorders.