The Law of Conservation of Value Implies That

question 21

Multiple Choice

The law of conservation of value implies that

• A)the return on a firm's common stock is unchanged when debt is added to its capital structure.
• B)the value of any asset is preserved regardless of the nature of the claims against it.
• C)the return on a firm's debt is unchanged when common stock is added to its capital structure.
• D)the value of an asset increases as debt is reduced.

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Definitions:

Installation

is the process of setting up or assembling a piece of equipment or system in its place of operation.

Consequential

Referring to outcomes or results that follow as a direct or indirect effect of an action, often used in the context of damages in legal settings.

Requirements

Mandates or criteria set forth for achieving or maintaining a specific standard or fulfilling a specific condition.

Cover

In commercial transactions, the act of purchasing substitute goods when a seller fails to fulfill a contract.