Which of the Following Statements Is False

question 26

Multiple Choice

Which of the following statements is false?

• A) From a theoretical standpoint,the capital weights used to calculate the WACC should be based on the market values of the different securities.However,if a firm's book value weights are close to its market value weights,book value weights can be used as proxies.
• B) Generally,only long-term debt is included in the calculation of the WACC,because the WACC is used for capital budgeting purposes,which includes long-term assets,and those assets are financed with long-term capital.
• C) The first break point a firm encounters in capital budgeting is for retained earnings,unless a firm has zero or negative net income.
• D) The weighted average cost of capital will change whenever a break point occurs.
• E) Answers a and b are both false.

---

Definitions:

Potential Liability

Potential liability refers to the possibility that a person or entity may be held legally responsible for actions or consequences in the future.

Third Party

An entity or individual not directly involved in a legal contract or agreement, but that may be affected by it or participate in certain transactions.

Accountant's Work

Professional activities undertaken by an accountant, including auditing, financial reporting, and tax planning.

Criminal Liability

The legal responsibility for a person or entity for criminal actions or omissions that violate laws, leading to prosecution and punishment.