Which of the Following Statements Is False

question 1

Multiple Choice

Which of the following statements is false?

• A)If management does not consider the needs of the bondholders of a firm, they could end up destroying shareholder value.
• B)In a perfect capital market, if a firm's current capital structure is not optimal, one can expect that firm to be a takeover target.
• C)Management should focus only on the needs of a firm's shareholders since they are the true owners of the firm and, as such, they elect the firm's directors.
• D)If management chooses to ignore the needs of bondholders when structuring a firm, the firm can be expected to have to pay a higher interest rate on its debt.

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Definitions:

Equilibrium Value

The price and quantity at which the supply and demand for a good or service balance each other out.

VMPL Curve

The VMPL curve, or the Value of Marginal Product of Labor curve, represents the additional value created by employing one more unit of labor, holding other inputs constant.

Market Wage Rate

The prevailing rate of pay for a specific job in the competitive labor market, determined by supply and demand for labor.

Labor

The human effort, including physical and mental exertion, used in the production of goods and services.